The Groupon logo is engraved in a glass office partition in the company's international headquarters on June 10, 2011 in Chicago, Illinois.Scott Olson
Groupon Inc.'s debut on the Nasdaq shows that there still an appetite for intriguing yet unprofitable Internet-related companies: Within the first hour of trading, the shares jumped nearly 56 per cent – though the enthusiasm has since subsided a little.
And what makes this debut even more impressive is that the shares were priced at $20 (U.S.) each, considerably higher than the $16 to $18 range that the company had originally been looking for. This implies that there's already a lot of optimism priced in. The starting price valued Groupon at an amazing $12.7-billion; the share price gain implies a value of nearly $20-billion. Consider that Google Inc. tried to buy the company at just $6-billion a year ago.
Oh, and don't forget about the backdrop: Groupon's early surge comes as the S&P 500 slumps about 1.4 per cent on Friday over concerns about the U.S. economy, Europe and just about everything else. In other words, Groupon isn't launching into a raging bull market – and yet it is still doing just fine.
The narrow slice of ownership might be helping the company: Groupon's initial public offering made just 4.7 per cent of the company available to the public – the lowest ownership slice for an Internet company since at least 2000, according to Bloomberg News. Scarcity seems to be working in its favour.
Just don't expect a smooth ride here. LinkedIn Corp. made a similar splash when it went public in the middle of May. It more than doubled on its first day of trading, but since then it has endured about 30 days in which the stock has risen or fallen by 5 per cent or more. Count Friday among them: The shares fell 9.1 per cent in late morning trading.
David Berman