Groupon set to price closely watched IPO | Reuters:
'via Blog this'
* Groupon may raise IPO price above current range
* Low float may help shares in IPO debut
* Longer-term outlook for daily deal leader cloudy
By Alistair Barr and Clare Baldwin
Nov 3 (Reuters) - Groupon Inc is set to price one of the year's most closely watched initial public offerings late Thursday, to strong demand for the scaled-back stock market debut of the largest daily deal company.
Chief Executive Andrew Mason and his executive team have spent almost two weeks on the road pitching to investors and addressing criticism about a replicable business model, slowing growth and accounting concerns.
To pull the deal off the company cut its valuation by about half. Existing shareholders aren't selling and only 4.7 percent of the company is being offered -- the second-smallest stake float in the past decade. It also skipped meetings with potential investors in Europe and Asia.
Solid demand for a limited supply of Groupon stock may support the IPO on its Friday debut.
Longer-term, Groupon shares may be volatile on concern about the company's ability to generate profits and the likelihood that existing investors will sell some of their holdings at some point.
A year ago, Groupon turned down a $6 billion offer from Google Inc . Earlier this year, the daily deal company began talking to bankers about an IPO that would have valued it at more than $20 billion.
By October, Groupon was planning to raise about $540 million from the IPO, down from $750 million earlier in the year.
COMPETITION
Long term, Groupon's many competitors will likely push the money-losing company even further into the red, said one investor at a $350 million hedge fund who attended the New York roadshow but decided to pass on the IPO.
"On the roadshow they say they're going to keep marketing spending relatively flat on absolute terms yet they'll get margin expansion from it but I seriously doubt it," said the investor. "Competition is coming: you're going to have to spend more."
Amazon.com , the world's largest Internet retailer; Google, the biggest online search company; and American Express, a leading credit card issuer, have all launched daily deal businesses this year.
"When you take a closer look, the only reason that they're generating cash flow is because they stretch out the payment terms to merchants to 60 days," the investors said. "If that wasn't the case, they'd actually be burning cash."
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