by Nick Wright
The daily deal site has raised £437 million with its initial purchase offer, and Groupon will begin trading on the New York Stock Exchange in a few hours. During the IPO, shares sold for £12.50 (20USD), which was higher than originally expected.
The company offered 35 million shares instead of the expected 30 million. However, this IPO only represents 5% of the business, which is a historically low figure. Tech companies normally offer up an average of 27% of their company value. Groupon still has the biggest piece of the daily deal pie, but the company has several new competitors and some customers are leaving the service after being overloaded with too many daily deal emails. The increased competition from companies like Living Social, Google, Amazon, and American Express has given merchants increasing choice among daily deal providers and caused Groupon to cut its margins.
As a result, the company valuation was lower than Groupon was hoping for earlier this year. However, many investors still believe the company is overvalued, and that the high share price is mainly a result of the small flotation.
Since LinkedIn’s successful IPO earlier this year, there has been a lot of buzz concerning IPO’s from companies like Groupon, Zynga, and Facebook. However, many offerings, including Groupon, have been on hold the last few months because of the uncertainty in the financial markets. Groupon has used this extra time to make changes to its accounting systems based on advice from regulators. Even though the company is solid, it will take some time to determine just how accurate this valuation has been.
Do you think these tech companies are overvalued?