Groupon shares rise 31 percent on 1st day
Published 9:49 pm Friday, November 4, 2011
LOS ANGELES — Groupon Inc.’s first day of trading had all the hallmarks of the dot-com boom, including a big stock jump for an unprofitable company.
Shares of the daily-deals website rocketed 31 percent after its listing on the Nasdaq Stock Market, raising $700 million for the 3-year-old company. It was the largest initial public offering for a U.S. Internet company since Google’s debut in 2004.
The performance helped put to rest fears about the hobbled IPO market, which fell apart this year amid the global market volatility. And that bodes well for other well-known technology names waiting for their turn to go public, including social media behemoths Facebook Inc. and Zynga Inc.
“It’s really an astonishing first-day opening (for Groupon) considering all the criticism it’s endured over the past couple of months,” said Lee Simmons, an IPO researcher at Dun &Bradstreet. “This signals that there’s really pent-up demand for these types of stocks.”
Groupon, which was priced Thursday night at $20, closed at $26.11. The stock closed below the $28 level at which trading opened and the $31.14 high of the day. The company sold 35 million shares in a deal that valued the entire company at $12.7 billion. The stock trades under the ticker symbol “GRPN.”
Groupon endured a tortuous route to its IPO. A few months ago, it was a considered a fast-rising social media phenomenon that intrigued investors by spurning a $6 billion takeover offer from Google.
But Groupon was dogged in the past two months by questions about its accounting practices and uncertain business model. The Securities and Exchange Commission raised concerns about some of Groupon’s accounting, stirring fears among investors about the company’s credibility.
Like some other high-flying Internet companies, critics see Groupon as vastly overpriced, considering it hasn’t turned a profit and its business is being targeted by well-heeled competitors such as Amazon.com Inc.
“In the short run, it’s a great trade,” said Josef Schuster, founder of IPO research firm IPOX Schuster in Chicago. “In the long run, I don’t want to hold it. There’s great risk.”
