* Groupon may file to raise IPO price next week -source
* Roadshow passes halfway mark with New York lunch
* Investors say they were pleased with CEO's performance
* Investors still unsure about business model, valuation
* CEO says Groupon ahead of where Amazon was after 3 yrs
By Clare Baldwin and Alistair Barr
NEW YORK/SAN FRANCISCO, Oct 28 Groupon Inc is
considering raising its IPO price range, as underwriters grow
more confident about demand after completing the East Coast leg
of a two-week roadshow to woo investors.
One of the most closely watched initial public offerings of
the year, Groupon had previously filed with regulators to sell
30 million shares at $16 to $18 apiece, scaling back its
aspirations amid weak market conditions and uncertainties over
its long-term business outlook.
The company is now considering raising the price range and
could file an amended IPO prospectus early next week, said a
source familiar with the situation. Groupon declined to comment
and no other details were immediately available.
Chief Executive Andrew Mason hosted a luncheon on Friday at
the St. Regis hotel in Manhattan -- the biggest event on the
roadshow, seen as crucial in helping Groupon's bankers decide
how to price the shares.
Fund managers who attended the meeting told Reuters they
were pleasantly surprised by how charming and composed Mason
was, since he has a reputation of being volatile after he
blasted Groupon's critics in a leaked staff memo this summer.
Nonetheless, quite a few investors said they were still
undecided about buying into the IPO, noting that Groupon faces
huge competition in the daily deals business. The company has
also had to change its accounting twice under regulatory
pressure and has lost two chief operating officers in the past
Mason "was a lot more likable, less arrogant in person than
I expected," said a money manager at a firm with more than $15
billion under management, who attended the Friday meeting.
"It's intriguing. It's such a massive opportunity if
they're the winner, so the question is, 'Do they become the
winner?'" he said, speaking on condition of anonymity.
Despite lingering concerns, investors expect the IPO to be
over-subscribed, partly because bankers have limited the float
to just 4.7 percent of shares.
One investor who attended the event said the investor's
hedge fund firm planned to ask for shares in the offer, but
added that it was very unlikely to get an allocation.
The risk is that Groupon may be flipped by some investors
on the first day. Later on, early-stage investors might want to
cash out through secondary issues, putting downward pressure on
"It will probably be like LinkedIn , a huge
moonshot," said a hedge fund manager with $500 million under
management, who attended Friday's presentation.
"There hasn't been an IPO in a long time and everyone will
clamor for it," he said, but added that he does not view
Groupon as a long-term investment.
Fidelity Investments, Capital Group and T Rowe Price already own Groupon stock from private investment
rounds and are planning on buying more shares in the IPO,
according to two underwriting sources.
The three asset managers all declined to comment so it was
not certain if they would follow through. Institutional
investors typically do not show their hand until a day or two
before the final pricing and stock market debut.
AHEAD OF AMAZON
Groupon scaled back its IPO to raise up to $540 million,
from a previous target of up to $750 million, amid Wall Street
concerns that the Chicago-based company faced well-funded
rivals such as Google Inc and Amazon.com Inc .
They have billions of dollars to put in play, while Groupon
expects to have about $723 million in cash and equivalents
after the IPO.
A private equity investor who attended the presentation on
Friday said he thinks Groupon is big enough that it is here to
stay, but he was still not sure how much the company is worth.
"People are questioning Groupon's business model but I
think that's misplaced," said the investor, whose firm has more
than $10 billion under management. "I don't know if it's worth
$11 billion or $5 billion or $20 billion -- that's where the
debate comes in -- but it's a real business."
Groupon, which is approaching three years old, stressed to
potential investors on Friday that its financials compared
favorably to those of Amazon in its early days.
Mason said Groupon is currently generating about $190 in
gross billings per customer per year on average, compared with
Amazon's $130 when it was at a comparable stage of development,
according to a person who attended the presentation. Amazon now
generates about $290 in gross billings per customer per year,
Mason was quoted as saying.
"Given the past mistakes management has made, they sounded
credible," Scott Sweet of research firm IPO Boutique said.
The one-hour presentation took place at a room atop the St.
Regis, a luxury hotel off Fifth Avenue that sports red carpet
stairways leading up from the sidewalk and staff in fancy
overcoats and top hats.
Security was tight and investors who were not
pre-registered and who tried to walk in were turned away. Those
investors who made it inside were offered chicken salad, bread,
chocolate chip cookies, and tea or coffee.
There were half a dozen questions after the presentation,
of which two focused on one slide that showed Groupon spending
roughly $14 to acquire each customer and generating a return on
that investment, according to one investor.
Another question focused on Groupon's efforts to reduce
marketing spending and how that will effect subscriber growth.
Executives and bankers are scheduled to meet with investors
in San Francisco, Denver and Chicago next week.
Underwriters on the Groupon IPO are being lead by Morgan
Stanley , Goldman Sachs & Co and Credit Suisse . The shares are expected to begin trading on the
Nasdaq on Nov. 4 under the ticker symbol "GRPN."