Groupon possibly rethinking its IPO

US online deals giant Groupon is reportedly re-evaluating its plans to go public. The Wall Street Journal reports that the company has become hesitant because of volatility in the stock market.

Citing a “person familiar with the matter”, the newspaper said that Groupon would not be cancelling its initial public offering but is reassessing the timing.

The Journal also reports that the group buying giant has cancelled a roadshow for potential investors which had been scheduled for next week.

The company had been planning to go public in mid September. It initially announced its plans to go public in June, seeking to raise as much as US$750-million.

The IPO has, however, been on shaky legs for some time now. When the Chicago based company announced its plans to go public, it faced scepticism from a number of commentators.

UK business blog, Real Business reported that such scepticism centred around the notion that Groupon had been “pouring money into luring new customers principally because it is losing existing users in droves”.

This lack of sustainability, it has been suggested, comes from the fact that a large portion of Groupon’s revenues arise from “breakage”, or customers paying for discounts which they then don’t bother to use. This suggests that the daily deals are not highly valued.

Such customers also makes getting repeat deals from the small companies who make up the bulk of Groupon’s client base more difficult. Such businesses are unlikely to receive repeat business if clients don’t make use of the deals.
Groupon, which was founded in 2008, rejected a US$6-billion takeover bid from Google.

The company reported a net loss of US$102.7-million for the first quarter of 2011 on revenue of $644.7-million.

After months of unprecedented growth, February also saw it report a fall in sales from US$90-million to US$61-million

Groupon has so far declined to comment on the postponement.