Groupon Gives Thanks for Its Big Debut

Groupon shares climb to $28 after open

Daily deals site Groupon seems to be full of gratitude today—and for good reason.

After makings its public debut on the Nasdaq at $20 a share this morning, the company’s stock climbed more than 40 percent to about $28 by early afternoon.

The IPO pop makes a billionaire out of CEO and co-founder Andrew Mason, whose shares are now worth about $1.3 billion. And it values the company at almost $18 billion, about three times the amount offered by Google last year and far above the $12.7 billion expected when it filed IPO documents with the SEC last month.

In its typical whimsical fashion, the company tweeted, “We wanted to extend our gratitude to those who made this big day possible: our customers, our merchants, and that one guy with the hair.”

Shares in the Chicago-based company began trading on the Nasdaq around 10:45 a.m. this morning, under the ticker symbol “GRPN.” Within hours of trading, shares peaked at $31.14 before falling back to around $28.

Although documents filed with the SEC last month indicated that shares would price between $16 and $18, after outsized demand, the company boosted its share price to $20 and added 5 million shares to the offering (for a total of 35 million). The increase makes Groupon’s IPO, which has raised about $980 million, the biggest IPO by a U.S. Web company since Google.

Despite the surging share price, the company’s journey to the Nasdaq has been rocky. In the months leading up to its IPO, Groupon has been cricized for executive departures, offbeat accounting, and business model weakness. Several analysts have vocally challenged the company’s valuation, saying that daily deal fatigue, scaleability issues and copycat deals companies could stunt growth.

But Nick Einhorn, an analyst with IPO advisory firm Renaissance Capital, said that despite debate around the viability of Groupon’s business, there’s clearly demand for the stock.

“It’s a company that’s grown very quickly to date and is really a leader in a fast-growing market by a pretty big margin,” he said. “That’s pretty attractive to people.”

Another good sign, he said, is that Groupon broke even in its last quarter, which indicates that it should be able to be profitable soon.

While Groupon’s IPO was impressive, it still pales in comparison to LinkedIn’s blockbuster IPO earlier this year. On its first day of trading, shares in the company closed at more than double its offer price. Einhorn said that since the market volatility in August, investors have been a little less tolerant of risk and “not as quite as exuberant about Web 2.0 companies as they were when [LinkedIn and Pandora] went public.”

He also said that, in some ways, LinkedIn was viewed as a stronger company than Groupon. Not only is its business a bit more unique, its growth was accelerating, not decelerating like Groupon, when it went public.

As for the stock’s future trajectory, Einhorn said it would likely be volatile until the company shares results—perhaps when it releases fourth-quarter earnings early next year.

“Ultimately, the company is still fairly early stage. It’s only been around for three years,” he said. “How the stock does is going to really depend on how well the company executes on its plans.”