Groupon Inc, in accordance with their plans to raise around $540 million in their initial public offering (IPO), plans to sell around 30 million shares at $16 and $18 each. This amounts to less than 5% of the company.
This sum is less than the company originally planned, but the company is facing a weak equities market and questions about its business model.
The midpoint would put Groupon at around $10.8 billion (£6.8 billion) in value, which is far more than the $6 billion figure that Google offered to buy the company with last year.
However, it is almost half of what the company was initially expected to go for, which was $20 million.
Some analysts predict that Groupon’s shares will struggle as they hit the market in November because of qualms about their business model. They say that investors will be leery of the company because it faces intense competition because the daily deal industry has low barriers for entry.
The company has also come under criticism because it has had to change its accounting procedures twice after being pressured by regulators in addition to losing two chief executives this year.
Josef Schuster of IPO research and investment house IPOX said that the Groupon IPO strikes him “very, very unattractive.”
He also said that at $10.8 million, the company is over-valued.
The “daily deal” business has taken off and expanded into a milti-billion dollar industry since Groupon first came in the scene in 2008. Since then, hundreds of businesses have launched to compete with Groupon.
Internet industry giants Google and Amazon.com have also thrown their hats into the daily deal ring.
Brad Gastwirth of ABR Investment Strategy echoed Schuster’s sceptic sentiments about Groupon’s IPO. He said that while the lowered valuation of the IPO from $750 billion to $540 million will help the IPO, investors are concerned about whether the online company can really compete in higher margin products.
He has said that there are “still many small questions” that must be answered before he feels “comfortable” about the Groupon public launch.
As Groupon is among the most closely-watched IPOs in this year’s tumultuous markets, many are watching to see how the scene plays out. Should the company do well, it could mean good news for other online companies that are considering going public, such as mobile applications firm Zynga and the social networking website Facebook.