Groupon Loses Steam, Plans Scaled Back IPO

Groupon, Inc. on Wednesday announced that they are planning to scale back their IPO offering. Company officials will meet with their investors in the next few days to sell them on a deal valued at $12.5 billion, far below original estimates that valued the company in the vicinity of $15 billion to $20 billion.

The plan to scale back the company’s IPO offering comes on the heels of regulator questions regarding Groupon’s accounting practice known as “adjusted consolidated segment operating income” which forced them to change the way they book revenue, taking a very large hit in the meantime.

Under the initial stock sale the company is expected to raise in the vicinity of $500 million to $700 million, with the smaller value equaling less than 10% of the company’s outstanding shares. If the lower price share is met Groupon may be able to fetch higher prices in the future by boosting demand after a small fire sale.

One person close to the initial offering says Groupon executives are opening up the small number of shares in an attempt to raise some quick fundraising capital to help the company expand.

In the six months that ended June 30 Groupon posted a net loss of $203.9 million on revenue of $688.1 million, those numbers compare to a loss of just $27.4 million on revenue of $58.9 million the year prior.

Helping the company navigate the IPO market are the following firms:

Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group.

Do you think Groupon is still overvalued at $12.5 billion? How much do you believe the company is worth?