As Groupon’s IPO nears its debut on November 4th, the company is rumored to want to increase its stock issuing price due to the positive reception of its IPO roadshow. Some call this “not leaving money on the table”.
It would be a risky game for the company to raise its price in this already highly speculative and risky IPO. Groupon needs the cash. Investors need to see a high upside. VCs need liquidity. Nobody wants to see an IPO that flops, and even less so Groupon collapse, as argued by Rocky Agrawal in Venturebeat.
Groupon’s IPO stock price could at first rise well above the current asking price of $16-$18 as a result of the well orchestrated speculative rally. Past the IPO fever of the first day(s), many smart investors will take their profit and the price will fall to the lower levels more closely related to the company’s financial outlook – as happened in most recent IPOs.
By raising its price, Groupon could chill investors and prevent the rally.
There are major flaws in Groupon’s fundamentals : 1) growth slowdown, 2) commission erosion, 3) short-term liabilities, 4) diminishing revenue per subscriber, 5) questionable operating efficiency, 6) questionable management ability to lead a quoted company. This issues are not addressed in the rosy picture painted by the company’s roadshow. According to these fundamentals, Groupon does not command the price it is currently asking for, and even less so a higher price.
But Groupon could be one of many stock prices decorrelated from their companies’ fundamentals.
These issues are discussed in the remaining of this post which updates and expands on a detailed analysis I published in June under the title Groupon Bashing Unleashed …