News & Resources

Some wonder about Groupon's high business valuation

Sep 16, 2011 Karen Umpierre

The internet has changed the way that many people find out about a particular business or view current offers. More and more people are able to use their smartphone devices to find and inform friends of products or services being used. One of the most popular online trends are daily deals sites that allow friends to find money saving deals over the internet and spend money at the location. Though the retailers must give consumers a discount, it can often result in a new client base. The industry leader in this sector is Groupon, which gives consumers the chance to take advantage of "Daily Deals," and has seen usage of its services grow at an rapid rate. There has been much speculation over the past few months that the firm will be going public, however{,} uncertainty about its business valuation has put its IPO on hold. If it does go public, Groupon will join a number of other online companies that have been able to cash in on the niche's growing popularity. In June, internet radio company Pandora Media, an internet radio company, went public and was able to raise $234.9 million for $16 a share. The business valuation was higher than many analysts had expected and was a major cash windfall for the company's founders. Some firms have struggled following impressive IPO's. When LinkedIn went public in May it's shares were priced at $45 each, with a business valuation of $4.3 million. And while there was a great deal of excitement soon after, its dramatic downturn have left some investors unsure about whether to take a chance on other similarly-hyped brands. "The proposed IPO, which was targeting a company valuation of $20 billion to $30 billion, is now on hold, mostly because of the skittish equity markets," Barron's reports. "The poster child for publicly traded social-networking stocks, LinkedIn, has dropped 20 percent in just the past eight weeks." In 2010, Google made a major bid for Groupon but was turned down. The search engine giant offered $6 billion but according to Bloomberg, the deal would have caused anti-trust issues for Google.