Jeff  Carter

Groupon announced that it was going forward with its IPO. The raw numbers that people care about are $10 billion in valuation, and $16-18 bucks per share.

Last spring, there were many out there that speculated Groupon might be worth $30 billion. In some circles, it became a parlor game to guess what the company might come out at and what their eventual valuation would be.

I have seen Groupon from almost the beginning. I was at a University of Chicago CEO Roundtable where Eric Lekofsky spoke. He mentioned they had just started a new company, and gave us the history of “The Point”, the failed predecessor to Groupon. Then he talked about Groupon and how many times offerings didn’t even tip.

At the time, I had just co-founded Hyde Park Angels, and after the presentation asked Eric if he would be interested in co-investors. He said, “No.”. That was that. Only he and his partner were funding it. They assumed a lot of risk.

It is reported that Google ($GOOG) offered Groupon $6 billion to buy them. They turned it down. Many wise people scratched their heads and couldn’t figure it out. They thought it was bad business not to sell for that kind of money, especially when the company was founded a scant 4 years ago.

As they have progressed in the IPO process, I think the analysts have done them some huge favors. They have had to restate their accounting, and become more transparent. They have a better handle on the actual cost it takes to acquire customers. Taking the steps toward an IPO gave them discipline.

If you look at the numbers, pursuing an IPO was a great decision. Turning down a sure $6 billion is a great risk. But, they saw the probabilities line up in their favor. They will make an extra $4 billion by turning Google down. Only government accountants wouldn’t blink at seeing an extra four billion in valuation. It’s a lot of Benjamin’s.

For the Chicagoland start up community any way you score it, Groupon is a smashing success. We will raise a glass of champagne and toast them. There is a lot of stuff going on here, and it’s not like the start up community on the coasts, although there are always going to be similarities.


Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.
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