Analysis of Groupon IPO
Now that's more like it! This is the kind of internet company that I was used to seeing back in 2000. Revenue is growing rapidly, but the Company is losing money.
As you can see in the table below from Groupon's registration statement, revenue has grown from $94,000 in 2008 to over $713 million in 2010 and has already reached almost $645 million in the first three months of 2011. Groupon lost $(456) million in 2010 and lost $(146) million in the first three months of 2011. Groupon earns revenue by selling "deals" (for example, Groupon sells a coupon for $20 that entitles the buyer to $40 worth of food at a restaurant). Groupon then pays a percentage of the "deal" to the merchant. Groupon explains that it spends a large amount of money on customer acquisition (mostly online advertising and marketing), which it expects to recoup as customers buy "deals" over time. Groupon also has a heavy selling, general and administrative expense load ($179 million for the three months ended March 2011 - 28% of revenue).
One other significant item to note: as of March 2011, Groupon had current assets of $291 million and current liabilities of $519 million - that means without additional cash infusions, they can't pay their bills. This is the curse of the rapidly growing company - the need for working capital. For now, it looks like Groupon's merchants are floating the business until the IPO allows them to catch-up.
Groupon also claims to have a significant database on consumer behavior that grows and provides better information the more people use it. Groupon pretty much invented this business, but now faces many competitors.
Year Ended December 31,Three Months Ended
March 31,20082009201020102011(unaudited)(unaudited)(dollars in thousands, except per share data)Consolidated Statements of Operations Data:Revenue$94$30,471$713,365$44,236$644,728Cost of revenue8919,542433,41124,251374,728Gross profit510,929279,95419,985270,000Operating expenses:Marketing1634,548263,2023,988208,209Selling, general and administrative1,4747,458233,9137,426178,939Acquisition-related——203,183——Total operating expenses1,63712,006700,29811,414387,148(Loss) income from operations(1,632)(1,077)(420,344)8,571(117,148)Interest and other income (expense), net90(16)28431,060Equity-method investment activity, net of tax————(882)(Loss) income before provision for income taxes(1,542)(1,093)(420,060)8,574(116,970)Provision (benefit) for income taxes—248(6,674)23(3,079)Net loss (income)(1,542)(1,341)(413,386)8,551(113,891)Less: Net loss attributable to noncontrolling interests——23,746—11,223Net (loss) income attributable to Groupon, Inc.(1,542)(1,341)(389,640)8,551(102,668)Dividends on preferred stock(277)(5,575)(1,362)(523)—Redemption of preferred stock in excess of carrying value——(52,893)—(34,327)Adjustment of redeemable noncontrolling interests to redemption value——(12,425)—(9,485)Preferred stock distributions(339)————Net (loss) income attributable to common stockholders$(2,158)$(6,916)$(456,320)$8,028$(146,480)Net (loss) income per shareBasic$(0.01)$(0.04)$(2.66)$0.03$(0.95)Diluted$(0.01)$(0.04)$(2.66)$0.03$(0.95)Weighted average number of shares outstandingBasic166,738,129168,604,142171,349,386172,966,829153,924,706Diluted166,738,129168,604,142171,349,386245,962,571153,924,706
Here is a list of investors who purchased shares prior to the IPO, which is pretty interesting (note that Howard Schultz, founder of Starbucks, is an early investor and is also on the Board):
Name of StockholderSeries D
Preferred
Stock(1)Series E
Preferred
Stock(2)Series F
Preferred
Stock(3)Voting
Common
Stock(4)Non-Voting
Common
Stock(5)Series G
Preferred
Stock(6)Date of
PurchaseTotal
Purchase
PriceEntities affiliated with New Enterprise Associates6,560,1741/15/08$4,799,999Andrew D. Mason1,800,00011/1/09$144,000Entities affiliated with Accel Partners2,932,55211/17/09$20,000,005Entities affiliated with New Enterprise Associates1,466,27611/17/09$10,000,002The Board of Trustees of Leland Stanford Junior University7,33211/17/09$50,004Entities affiliated with Digital Sky Technologies3,113,0804/16/10$100,000,000Entities affiliated with Battery Ventures1,089,5784/16/10$35,000,000Goodrec, Inc. stockholders357,3005/6/10(7)Entities affiliated with CityDeal Management UG19,800,0005/15/10(8)
Name of StockholderSeries D
Preferred
Stock(1)Series E
Preferred
Stock(2)Series F
Preferred
Stock(3)Voting
Common
Stock(4)Non-Voting
Common
Stock(5)Series G
Preferred
Stock(6)Date of
PurchaseTotal
Purchase
PriceGoodrec, Inc. stockholders120,00011/6/10(9)Ludic Labs Inc. stockholders1,230,00011/30/10(10)Entities affiliated with CityDeal Management UG21,600,00012/1/10(11)Entities affiliated with The Growth Fund of America, Inc. 5,539,73012/17/10$175,000,071Entities affiliated with Fidelity Investments3,165,55912/17/10$100,000,009Entities affiliated with Morgan Stanley Investment Management2,374,17012/17/10$75,000,030Entities affiliated with T. Rowe Price3,165,55912/17/10$100,000,009Allen & Company, LLC126,6221/11/11$3,999,989Entities affiliated with DST Global Limited1,614,4361/11/11$51,000,033Andressen Horowitz Fund II, L.P. 1,266,2231/11/11$39,999,985Entities affiliated with Battery Ventures VIII, L.P. 728,0791/11/11$23,000,016Entities affiliated with Greylock XIII Limited Partnership2,057,6131/11/11$64,999,995Guy Oseary Family Trust63,3111/11/11$1,999,994KPCB Holdings, Inc. 2,057,6141/11/11$65,000,026Entities affiliated with Maverick Fund Private Investments, Ltd. 1,582,7801/11/11$50,000,020SLP Green Holdings, L.L.C. 1,582,7791/11/11$49,999,989Entities affiliated with TCV Member Fund, L.P. 4,748,3391/11/11$150,000,029Howard Schultz316,5562/10/11$5,000,002Matt McCutchen14,5202/10/11$229,343Entities affiliated with MEP Associates IV, L.P. 633,1122/10/11$10,000,004Placido Arango63,3112/10/11$999,997Theodore J. Leonsis63,3312/24/11$1,000,313