It's fitting that Groupon -- the daily deals leader that at one time was valued as high as $20 billion -- is finally gearing up to go public at a discount.
The Wall Street Journal is reporting that Groupon is now looking to go public with a market capitalization of less than $12 billion. The flash sale specialist is also selling fewer shares to the public, a move that will make it easier to pull off this deal in this iffy climate.
Groupon's Grim Fairytale
Groupon was everyone's darling earlier this year. Bargain seekers were hopping over to sites offering localized deals for area merchants. Getting 50% off at that stylish Thai restaurant that you've been hearing so much about or snagging a 65% discount on a long overdue mani-pedi are compelling value propositions at a time when everybody wants more bang for their battered buck.
However, Groupon's fairytale IPO story has taken a turn for the worse in recent months.
Once Groupon filed its prospectus, investors realized that the company was growing as quickly as they expected -- but also losing a lot of money.
Regulators began to call out some of Groupon's accounting standards in its filing, forcing Groupon to reclassify its financials in an even more problematic light.
Groupon has scared away not one -- but two -- chief operating officers this year.
Where does Groupon go from here?
The IPO Waters Are Getting Less Chilly
After a nearly two-month dry spell during the market downturn, companies are starting to go public again. Zeltiq Aesthetics (ZLTQ) -- the company behind the FDA-approved CoolSculpting nonsurgical process that freezes away fat cells -- went public this week. Wireless connectivity specialist Ubiquiti Networks (UBNT) went public Friday.
Before that, you have to go all the way back to the mid-August debuts of data backup provider Carbonite (CARB) and Chinese video-sharing site Tudou (TUDO) to find the last time that underwriters were able to successfully take new companies public.
Like Groupon, Zeltiq and Ubiquiti needed to lower their initially lofty expectations to find enough buyers for their freshly minted shares. However, both Zeltiq and Ubiquiti are trading higher than their reduced IPO prices. This bodes well for the potentially public companies taking practice swings in the on-deck circle.
More Deals Are Coming
Groupon should be able to complete its IPO under these new terms in a couple of weeks. And it's not the only company hoping that the debut is a success. Groupon's nearest rival -- LivingSocial -- also is an unlikely cheerleader because it also has its heart set on trading publicly.
If the Groupon IPO is a flop, underwriters are going to have a hard time getting investors excited about LivingSocial as a stock exchange debutante.
So keep an eye out for Groupon's IPO as early as next month, but approach it the same way as you would sifting through the site's daily deals: Don't dive in unless you're sure that it will give you the best bang for your buck.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article.
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