After months of speculation, Groupon Inc. today filed for a $750 million initial public offering. Morgan Stanley and Goldman Sachs are listed as co-lead underwriters on the filing, with Credit Suisse also participating.
In an S1 filing with the U.S. Securities and Exchange Commission, Groupon says it plans to go public with a dual-class stock structure similar to LinkedIn, a social networking service for professionals that carried off a highly successful IPO last month. Companies often use that approach to concentrate voting power in the hands of founders and early investors. In the case of Groupon, executives Eric Lefkofsky, Bradley Keywell and CEO Andrew Mason own 41.7% of the company’s class B shares, according to the IPO filing.
The timing of the filing is likely due to the market’s hunger for social media-related stocks, says Greg Sterling, an analyst and founder of Sterling Market Intelligence. “There’s a hunger for opportunities like this,” he says. “We saw that when LinkedIn’s IPO doubled in value on its first day. There is a pent-up demand for this.”
The daily-deal site’s revenue shows its explosive growth. The company says it had $644.73 million in revenue in the first quarter of 2011, up from $44.24 million a year earlier. The company’s 2010 revenue was $713.4 million, more than 20 times its 2009 revenue of $30.5 million.
Despite that sharp revenue growth, Groupon has yet to turn a profit in its first three years of operations. It posted a net loss of $102.7 million in the first quarter of this year. That followed a net loss of $389.6 million in 2010 and $1.3 million in 2009.
The company says its operating expenses will significantly increase in the foreseeable future as it invests in efforts to expand its subscriber base, increase the number and variety of deals it offers, expand its marketing channels, increase its operations, hire additional employees and develop its technology platform.
Those investments show Groupon’s awareness that, despite being the market leader, it has to continue to innovate, says Sterling. “They are very conscious of the fact that the core of their business is building relationships with merchants,” he says. “They need to maintain and strengthen them, as well as build out their technology.”
The company has 7,107 employees, roughly half of whom are in sales. Groupon sold 28.1 million vouchers in the first quarter.
The company notes that it is unsure whether it can sustain its strong growth. “We have experienced rapid growth over a short period in a new market that we have created and we do not know whether this market will continue to develop or whether it can be sustained,” Groupon notes in the filing.