Groupon Files for IPO to Raise $750 Million
Groupon has filed for an initial public offering with the SEC seeking to raise $750 million, making it one of the largest offerings in recent memory.
Groupon shares will be offered by both the company and existing shareholders. The proceeds from the offering will be used for working capital and other general corporate purposes.
In the filing, Groupon disclosed it has 7,000 employees and 83 million subscribers across 43 countries. As the leader in the group-buying daily deals market, it said a bulk of its sales are coming from the health and beauty segment and food and drink.
The driving force behind the company so far has been the CEO and co-founder Andrew Mason, who is often described as being charmingly quirky. At the D conference yesterday, Mason declined to talk about the likelihood of filing for an IPO, opting instead to give interviewer Kara Swisher a “death stare.”
Electing to only answer questions about the IPO in broad strokes, Mason told Swisher, “I run a business and going public is a way for shareholders to get money. In this day and age, people have a tolerance for companies running over the long term. I don’t think there’s any downside to making a decision like that.”
In other words, it’s only the first inning of the daily deals market Groupon initiated a mere two years ago. Clearly, he believes Wall Street will be tolerant and patient as it figures the business out in the future.
Here’s a quick look at some of its financial highlights:
In 2010, Groupon’s revenues totaled $714 million, a huge leap over 2009’s revenue of $30.5 million. What’s astonishing is that for the three months ended March 31, 2011, Groupon’s revenues soared to $644.7 million. However, the company is not profitable on a GAAP basis, losing $389.6 million in 2010 and a $113.9 million in the first quarter 2011.
Groupon has created something it calls “adjusted consolidated segment income” to also report its profits. Under that measurement, Groupon generated $270 million in gross profit in the first quarter 2011. Its operating income was $81.6 million in the same period. That compares with an adjusted operating income of $60.6 million for all of 2010.
One huge cost it likes to subtract from its net income is $179.9 million in expenses for online marketing in the first quarter 2011 alone.
It’s hard not to lose money when growing so fast. It sold 30.3 million vouchers in 2010, and nearly the same amount, or 28.1 million, in the first quarter.
In the SEC filing, Mason disclosed that after making $150,000 last year, he elected to drop his annual salary to $575.
The company’s stock structure is a little confusing with two classes.
Currently, Mason owns 23 million, or roughly 7.7 percent, of the Class A common stock; by that measurement, he is not the largest shareholder among its founders. Chairman and co-founder Eric Lefkofsky owns 21.6 percent of the company, or 61.4 million shares.
It is the Class B shares which control the company, and those are owned by Mason, Lefkofsky and its third founder Brad Keywell.
Other large investors who own Class A shares include Silicon Valley’s Accel Ventures, which owns 5.6 percent, Maryland-based New Enterprise Associates, which owns 14.7 percent, and, interestingly, Germany’s Samwer brothers, who own 10.3 percent of the Class A shares.
In a letter to shareholders in the filing, Mason writes, “I started the Point to empower the little guy and to solve the world’s unsolvable problems. A year later, I started Groupon to get Eric to stop bugging me to find a business model.”