* No details on number of shares, price range
* To trade under "GRPN"; no exchange specified
* Posted revenue of $644.7 mln in first quarter
* Posted quarterly loss of $146.48 mln, sees rising costs
(Adds CEO Mason comment, venture capital, details from SEC
filing, PALOS VERDES dateline; changes second byline)
By Jennifer Saba and Sarah McBride
NEW YORK/PALOS VERDES, Calif., June 2 Daily
deals site Groupon Inc filed for an initial public offering,
hoping to capitalize on the biggest investor stampede into Web
start-ups since the dotcom bubble burst a decade ago.
The company filed on Thursday to raise up to $750 million
in its IPO, an offering that has been speculated about for
months and that will be watched as a barometer of whether
Internet valuations have become too rich.
In April, a source told Reuters that Groupon could raise as
much as $1 billion in an IPO that could value it at $15 billion
to $20 billion. [ID:nN14107204]
Thursday's filing did not specify the number of shares to
be sold in the IPO, the price range, or the exchange, though it
did say the shares would trade under the symbol "GRPN." It also
said the $750 million figure is preliminary and may change.
Other Web companies including LinkedIn Corp LNKD.N and
China's Renren Inc (RENN.N) have had strong IPO premieres, and
anticipation is building toward a fever pitch for potential
offerings by Facebook and Twitter. Pandora, a Web radio
company, raised its IPO size to up to $141.6 million on
Thursday -- 40 percent more than estimates. [ID:nL3E7H22Z6]
Some doubt whether the buzz surrounding the new Web
generation is justified, warning that the hype is reminiscent
of the atmosphere prior to the dotcom bust in 2001.
Groupon has also been called into question by critics who
say its business -- essentially a coupon service -- can be
easily replicated both by startups and existing Web
powerhouses. Google (GOOG.O) has already begun such a service.
At the All Things Digital conference Wednesday, Groupon
Chief Executive Andrew Mason himself admitted he feared
possible competition from businesses that "have some twist on
the model we haven't thought of yet."
"I think investors will go for this one," said Ryan Jacob,
chairman and chief investment officer of Jacob Funds, which
includes the Jacob Internet Fund. "Whether or not it's worth
the valuation it comes at is still an open question."
Groupon in the filing warned that it has incurred losses
ever since its birth 2-1/2 years ago, that its technology may
not be up to the task of handling demand, that expenses are
bound to rise, and that the market may not continue to grow.
"As with any business in a 30-month-old industry, the path
to success will have twists and turns, moments of brilliance
and other moments of sheer stupidity," Mason, 30, said in a
letter to potential stockholders that was attached to the
Reuters Breakingviews [ID:nN02283137]
Key facts on Groupon, market [ID:nN02275753]
BUBBLE? WHAT BUBBLE?
Groupon backer Marc Andreessen, the Netscape co-founder who
took part in a recent round of funding, waved off fears of an
emerging tech bubble, citing historically low PE ratios.
Founded in November 2008 by Mason, a Northwestern
University music major, Groupon offers discounts on everything
from restaurant dining to sky-diving excursions. The "group"
part of the name refers to the fact that many deals are
activated only when a certain number of people sign up.
Discounts often run from 50 to 70 percent; on Wednesday it
offered $20 worth of T-shirts at Old Navy, a Gap Inc (GPS.N)
chain, for $10.
Groupon, which has 83.1 million subscribers and deals with
nearly 57,000 local merchants in 43 countries, is backed by
some of the top venture capital firms in Silicon Valley,
including Andreessen Horowitz, Battery Ventures, Greylock
Partners and Kleiner Perkins Caufield & Byers. T. Rowe Price
Group and Fidelity Investments also own a stake, among others.
At one point, Groupon caught the eye of Google, which
approached the company with a $6 billion takeover offer in
December but was rebuffed, a source told Reuters at the time.
Today, Google, Facebook, LivingSocial and a clutch of other Web
companies are offering their own coupon programs. Moreover,
Groupon noted in its filing it depends on existing partners and
potential rivals like Google and Facebook to lure business.
"Groupon's had a lot of success in its early stages, but
the model of group buying has limited barriers to entry and
it's being replicated," said BCG Partners' Colin Gillis.
Groupon for now holds a clear lead over rivals such as
LivingSocial, part-owned by online giant Amazon.com Inc
(AMZN.O). LivingSocial has about 26 million subscribers.
Filing an IPO while ahead, along with demand for consumer
tech companies, should help Groupon raise money.
"The IPO window has been closed so long there's a backlog
of demand," said Ethan Kurzweil, a vice president at Bessemer
Venture Partners, which backed LinkedIn.
But whether Groupon can turn its popularity into profit is
another matter. The company takes a cut from merchants that
provide the coupons: in the first three months of the year its
revenue totaled $644.7 million. But it incurred a net loss in
the period of $146.48 million as it spent heavily to expand,
both by acquiring customers and by signing up merchants.
"The growth is astronomical and clearly a lot of the money
they're making is being plowed right back in the company," said
Jacobs. "The biggest concern is going to be: is this kind of
growth sustainable with a lot of new entrants in the market?"
While Groupon enjoys the spotlight trained on social media
companies such as Zynga, it needs resources others don't -- a
huge sales staff to enlist merchants and handle customer
Groupon disclosed in its filing that its staffing ballooned
to more than 7,000 employees at the end of March from 37 in
June 2009. Mason said it now had 8,000 employees.
Morgan Stanley, Goldman Sachs and Credit Suisse will act as
(Writing by Paul Thomasch; Additional reporting by Clare
Baldwin, Phil Wahba, Alexei Oreskovic; Editing by Tim Dobbyn,