Analyst: Groupon IPO Not "Rational Math"

By Chuck Sudo in News on Jun 9, 2011 1:30PM

The skeptics for the Groupon IPO continue to grow.E-commerce analyst Sucharita Mulpuru of Forrester Research wrote an open letter to potential investors stating there's no "rational math" for the daily deal website's valuation.

Mulpuru wrote, "This IPO game isn't about finding value, it's about finding a greater fool who actually believes the valuation is true. Trust me, you will be the fool."

Since Groupon filed its IPO prospectus, there's been much scrutiny over whether the company is a good stock market buy. The prospectus gave the public the first detailed look into the company's finances and there is some alarm regarding the losses Groupon has accumulated as it has expanded. The IPO could value the company at $20 or more, but Mulpuru estimates the true valuation to be closer to $2 billion.

In other Groupon IPO news, comments by chairman Eric Letofsky that the IPO would be "wildly profitable" may result in Groupon having to re-file the prospectus with the SEC. Federal regulations limit what can be said by a company after it files an IPO. Groupon CEO Andrew Mason wrote in an email to employees last week to remain silent on all matters related to the IPO for the next 90 days.