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Groupon IPO Faces Possible Delay: Local Expert Says Group-Buying Sites Hard To Measure

Groupon IPO faces delay

By Michelle Hammond
Thursday, 28 July 2011

Groupon will delay its initial public offering until mid to late September, according to reports, but the Securities and Exchange Commission has dismissed claims the company's regulatory review is taking longer than usual.

 

The US-based group-buying giant filed its S-1 registration documents with the Securities and Exchange Commission on June 2, saying it intends to raise $750 million.

 

According to the company's filing, Groupon has more than 83 million subscribers – although only 15 million have bought a coupon – and there have been 70 million coupons sold.

 

As of March 31, it had more than 56,000 merchants, compared with just 2,900 one year earlier.

 

There is no share price listed in the filing but reports suggest the company is aiming for a valuation of between $US20-25 billion.

 

However, it's been suggested the regulatory review process may take longer than usual for Groupon due to "nonstandard financial measures" used by the company.

 

But Wedbush Securities analyst Lou Kerner told Forbes.com the SEC commonly takes three months to review IPO registration documents, so the process has not yet taken longer than usual.

 

An SEC spokesperson confirmed this, saying "as a general matter, staff currently review all IPO findings. The length between a filing and the registration's effectiveness is three to six months".

 

However, it's since been reported the SEC may ask Groupon for more information about how it accounts for costs such as marketing.

 

Groupon could be forced to file new financial information about both its growth and costs, which would then be put under the microscope by investors and regulators.

 

The company joins several major tech companies that have moved to sell their shares on Wall Street this year, including LinkedIn and Zynga, generating speculation of another dotcom bubble.

 

Telsyte senior research manager Sam Yip believes Groupon's IPO has been delayed because investors are struggling to work out the success, profitability and sustainability of group-buying sites.

 

"The big question is, how profitable is it to run a [group buying] site after running out merchant margins and all the other costs, such as the high cost to acquire customers? This is a grey area that needs to be spelt out," he says.

 

Yip says Australia's group-buying industry is still 18 months behind that of the US, but we can expect to see similar IPO intentions among local players in the future.

 

"Australia is on its way to exceed $400 million [in group buying sales] this year but as to which company would be the first to file for an IPO, that's a very hard question to answer," he says.

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