Yesterday, Groupon, the daily coupon site that clogs our collective inbox each morning, with 50 percent off bikini-waxes and fried food, filed for a $750 million IPO. The price tag, as could be expected, inspired ardent proclamations from both those who believe the tech-bubble is in full swing and the rest of the investing community that is probably going to gobble up shares. For the latter group, the ones who do not find it disconcerting that a chain of grilled cheese restaurants that allow for mobile ordering just receiving $10M in venture capital, should listen up. Groupon is just one of many in an upcoming flurry of tech companies filing IPOs, so who is to say it’s the best or most desirable? Investors are anxious to hop on board the tech wagon while the market is hot, or before the eventual stock of the Grilled cheese company floats, but there are options. So let’s compare.
Groupon: The Chicago-based start-up that has enjoyed tremendous media attention ever since they turned down a sale offer from Google. “This company must be really special,” if they’re turning down offers from Google, “ the general public whispered. And since then, they have mostly proven to be. After its 2008 debut, Groupon boasted revenue of $94 million. A mere two years later, people, and their zeal for half priced spa treatments and other adventures drove the revenue up to$713 million. For the first quarter of this year, Groupon reported revenue of $644.7 million, with 83 million subscribers across 43 countries.
So Groupon is a total buy, right? Well that’s still up for debate. Groupon has already received some backlash for its greed in terms of the deals it makes with companies. Many corporations that have happily submitted to Groupon for the “free-marketing,” go on to regret it when they have attracted no new customers at the expense of selling their wares for around 75 percent full value.
There is most likely a sizeable window in terms of how long it takes for those views to become widespread, but Groupon is still a relatively new company. One that has inspired a great deal of competition, for instance from Living Social and others of its ilk. If investors begin to smell public disinterest surrounding the already overvalued company brewing, it could endure a colossal fall from its post IPO heights.
Facebook: It comes as a surprise to no one that facebook is the biggest company on this list. Discussion both in the news and “IRL” (in real life) on the topic of facebook is exhaustive, so we won’t spend too much time on it here. Facebook is the favorite on the secondary stock market and is valued at $76 billion. That price is higher than Boeing or Ford, but the most interesting thing about Facebook is comparing its value to the recently debuted LinkedIn. LinkedIn, after its first day of trading, was valued at 600 times its 2010 earnings of $15.4 million. If Facebook was subject to the same inflation-causing enthusiasm, it would receive a valuation of $360 billion on a similar IPO. Facebook’s IPO is more and more becoming inevitability. Speculation regarding a possible sale of the company has petered out as it has grown, In place of those whispers has been approximations of the company’s IP), currently pegged for April 2012. Granted, the timeframe will leave eager tech-bulls with a long waiting period, but this is a well developed company that has made itself almost indispensable to modern social interaction. Unlike many of the competitors, the product is well tested and continues to grow.
Pandora: Pandora Media, the company that uses musical genomes, to create playlists for its users debuted in 2007. Since then, they have endured royalty arguments and numerous imitators. The idea behind Pandora is highly attractive and it has garnered a considerable user base for that reason. What Pandora hasn’t done; however, is figure out how to make money. In the first 3 months of this year, Pandora Media lost $6.8 million. It expected to continue to lose money through 2012 according to SEC filings, but despite this, it’s filing an IPO. Just yesterday, the company took another step toward that goal, declaring a plan to price shares at $7 to $9 and intentions to raise as much as $141.6 million. That would value Pandora at $1.1 billion to $1.4 billion, a price that seems to exceed the value of a corporation that has yet to master sourcing its income.
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