The stock market's darling only a few days ago, Groupon is now trading at c.US$17, significantly below its IPO price of US$20.
On its roadshow presentation the company presented LTM revenues of 1.3 billion and said it planned to generate revenues in excess of US$1.5 billion (2011E) and US$4.0 billion (2012E) in the near future. Forecast operating profit visibility messages were much scarce.
How has the valuation of Groupon evolved since inception? Let's have a quick look:
|Date||Round||Cash in (US$ m)||Valuation (US$ m)|
|Nov-08||Seed / angel||1,0||N/D|
Who said vertigo? Kudos to all pre IPO investors.
With Amazon and eBay trading at 2.4x and 4.0x LTM revenues, respectively. The banks behind the IPO pointed to other comps in the sector (Twitter, Facebook, Zynga, LinkedIn), valued at multiples well north of that (from 11x to 177x) to make Groupon look relatively cheap.
At the IPO price the company was indeed valued at c.10x LTM revenues (market cap of US$12.7 billion). Minuscule share offerings like this one (5.5% of shares floated) have a way to be particularly volatile, though. This can be great on the upside, like when trading begins at US$28, or 30% higher, valuing the company at US$240 per subscriber or c.US$350,000 per merchant, but it can turn into a vicious downward spiral pretty quickly too.
No rating underpinned on anything different than earnings and cash flow can be sustainable in the long run.