A Good Day for Groupon and Internet Start-Ups - Business

After a month long journey filled with blunders, Groupon punched his ticket for public Friday. And the site daily deals received a warm welcome, a welcome sign for Internet start-ups are still waiting to make it public.

The IPO was priced at $ 20 the night before, rose 40 percent at the opening bell to hit $ 28. Actions violated $ 31 before settling at $ 26.11 at the close, valuing the company at three years, $ 16.5 billion.

A $ 700 million, the offer is the largest for an Internet company in the United States since Google in 2004. Groupon is also the first major company to make public since August, when the European sovereign debt and undermined investors' fears sent the IPO market in the freezer.

"Groupon IPO is certainly contributes to the U.S. market for technology offerings," said Josef Schuster, a fund manager at IPOX Schuster. "He said that people are willing to take risks again."

Up Friday was particularly encouraging given the recent criticism of the business model Groupon and lack of profitability. In recent months, several analysts loudly asked if the company was worth even $ 5 billion - not to mention its 11 digits.

While it remains to see how Groupon will trade in the coming months, analysts say its excellent first day could pave the way for a second wave of investor enthusiasm for the next generation of Internet start-ups and embolden companies looking to make it public. Zynga, which amended its filing Friday with the Financials upgrade, is on track to make his debut in the coming months. Facebook, a giant dominating the web, it is expected to follow later in 2012 with an offer that values ​​the company at more than $ 80 billion.

Some newly public companies have already re-upping. LinkedIn, which had a first success in May, with shares more than doubled on the first day of trading, announced its intention to offer up to $ 500 million additional shares.

"People were looking for reasons to be optimistic, well, they found," said Michael Duda, a venture capitalist at Consigliere, an investment firm of the consumer. "If you Zynga founder Mark Pincus, you probably do back flips. "Yet Mr. Duda noted, it has not invested in Groupon." I do not affect them personally. "

The question is whether Groupon will be able to move over here. Analysts remain skeptical that the fundamentals of Groupon justify the market value - a fear that echoes the rise of dot-com in the 1990s.

"The risk is down here," said Schuster, who has decided not to buy shares Groupon Friday. "It will be popular for short-term traders."

Groupon, like LinkedIn and Zynga, is part of an elite corps of start-ups that quickly rose to multi-billion dollar valuations, capitalizing on the growth of online social networks. Ascension of the group over the past two years has triggered a buying frenzy in the broader Silicon Valley. Investors of all kinds who want to own a piece of plowed millions next big thing in the new generation of start-ups, flooding the capital markets and raise prices across the board.

In this context, a rush of technology companies went public, such as Yandex, a Russian search engine, and Pandora, the online music service. In the first half of this year, the technology sector supported the largest IPO market. Offers technology accounted for about one third of all offers of this year, according to data from Renaissance Capital, an IPO consulting firm.

But enthusiasm seemed to peak earlier this summer, began to cool in August a context of equity market volatility and macroeconomic concerns.

At this point, the bankers Groupon, led by Morgan Stanley, Goldman Sachs and Credit Suisse cut their estimates for the price, according to a person with direct knowledge of the case and was not allowed to talk about the public offering. It did not help the company to the Internet has also worked on accounting issues with regulators who frowned on how Groupon is representing his income.

Since September dragged on, the underwriters encouraged the company to move forward with an offer, despite the turbulence. The market was far from ideal and the press was far from brilliant, but the plan was to continue a small offering size and price, which will allow the company to go public and to all related distractions behind.

Confidence began to build in October, while the management team and its insurers have begun a two-week tour across the country. Almost immediately, investors have started to place orders, several people said. After deep conversations with some of the biggest buyers, the Underwriters tested a higher price, above the initial target of $ 16 to $ 18 per share.

Subscribers to the company tried to give more grants to set up mutual funds, known for buying and holding instead of the less predictable hedge funds suspected of seeking a quick buck, according to two people with knowledge of the subject which were not authorized to discuss the matter publicly.

Some investors have expressed interest in paying more than $ 20 per share, but the bankers wanted to give a little space, instead of "price last dollar available", one of the people said. Underwriters, following the lead of companies like LinkedIn and Pandora, also kept the little offering, to just over 5 percent of the total shares.

Ultimately, the demand was so strong that the orders were more than 10 times the amount of shares offered.

The success of Groupon and other Internet companies, newly public could be a good omen for the industry. While shares of LinkedIn withdrew from their inception, the social networking site will be appraised at $ 8 billion. Zynga, which recently raised money at a valuation of 10 billion, has not had as many trips to the public and should be adopted by investors.

The stage start-ups in Silicon Valley can also see a boost.

"Groupon IPO is a natural diamond that will loosen up stuff," Mr. Duda, the venture capitalist, said. "The confidence is up, I saw more movement in the face from 30 to 45 days, I've seen in three to five months. "