The current bubble in social media companies is fascinating to watch and has all the hallmarks of every bubble since the Dutch Tulip boom. I have had a voyeuristic interest in Groupon for some time. I have a mate whose extended family is involved in a similar venture domestically – which has proved to be very profitable.
I find Groupon fascinating because of the trajectory of the company – its an interesting idea that was rapidly implemented but it also shows the frenetic nature of this sector. It is so 1999.
Groupon is set for an IPO which I have been watching with interest and then this note appeared.
Groupon Inc., seeking to raise $750 million in an initial public offering, asked six more banks to help underwrite the sale, including Barclays Plc (BARC) and JPMorgan Chase & Co. (JPM), said two people with knowledge of the situation.
Citigroup Inc. (C), Deutsche Bank AG (DBK), Bank of America Corp. (BAC) and Allen & Co. were also offered a role, said the people, who declined to be identified because the decision isn’t public. Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and Credit Suisse Group AG (CSGN) are leading the IPO, a June 2 filing said.
In the good old days of the tech boom there wasnt really a need to invite additional underwriters in to help you flog your stock – in fact they were lining up to do so. However, there is an additional twist to this which gives some insight into those behind the company.
In October 2010 Yahoo offered $3 billion to acquire Groupon a month later this was raised to $5.3 billion, an offer that was rejected in three days – remember this company was only launched in 2008. If I had a business that was only two years old and someone offered me $5.3 billion for it they could have it – there and then.
Given this it has to be asked what the founders thought they could achieve with an IPO and what level of payout they were looking for. I cannot functionally tell the difference between $3 billion and $5.3 billion and whatever figure comes after this. What could you buy with $5.3 billion that you couldnt buy with $3 billion?