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Chicagoist's Top 11 for 2011: Groupon's IPO

By Chuck Sudo in News on Dec 29, 2011 5:30PM

Image Credit: Seth Anderson

Depending on your opinion, Groupon is either one of the great successful business stories in recent years (founder Andrew Mason called Groupon "the greatest thing that's happened to small businesses since the telephone" in a leaked internal memo to employees) or it's a Ponzi scheme that offers payday loans to small businesses, as in the case of Drew's Eatery, which closed its doors because it dipped its toes into the daily deal pool one time too many.

Yet Groupon's growth and business model made it a prime candidate for an initial public offering and speculation among business analysts centered on how much money the company could raise with an IPO and what would be Groupon's value. They all let out a collective gasp when Groupon's IPO Prospectus sought to raise $750 million, then quickly sobered up once they started to see how Groupon values itself. For most, the prospectus was a first look into Groupon's financials and, try as Mason and company did, there's no easy way to spin a cumulative loss of $604 million. E-commerce analyst Sucharita Mulpuru wrote that Groupon's valuation wasn't "rational math."

The Securities and Exchange Commission raise a stinkeye not only at Groupon's IPO prospectus, but also at whether Mason's leaked memo violated the SEC's "quiet period," which apparently was one of many reasons Groupon's PR boss quit. Groupon's COO also jumped ship back to Google.

Ultimately, it was mostly for naught as Wall Street was bullish on Groupon when initial stocks were offered. Groupon wound up raising $700 million in its IPO, valuing the company at $12.76 billion. But the shares, which traded on its first day at $26.11, quickly sank to under $17.

At the end of the year, Groupon got what it wanted. The question remains: Will their business model be sustainable?