December 29, 2010, 11:33 AM

Groupon aims to raise $950 million in new funds

The daily deal site may use the large capital infusion to acquire international rivals.

Zak Stambor

Managing Editor

Lead Photo

Groupon Inc. is seeking to raise approximately $950 million in new funds, according to a filing this month with the state of Delaware, where the company is incorporated. The investment round would be the company’s seventh.

The company says in the filing that it intends to sell more than 30 million shares at $31.59 each. Depending on the number of shares issued, that price would value Groupon at $6.4 billion, according to VC Experts, a research firm that analyzes the value of private companies.

Groupon says in the filing that the shares would automatically convert into common stock if the company goes public. Groupon declines to comment.

The filing suggests that Groupon wants to buy similar companies outside the United States, says Lou Kerner, vice president equity research at Wedbush Securities.

“In markets that already have substantial players in place it certainly could be an attractive option for Groupon to acquire some of those companies that already have gained some traction,” he says. 

That would follow the approach Groupon has already taken. Earlier this month the daily deal site  launched Groupon Hong Kong, Groupon Singapore, Groupon Philippines and Groupon Taiwan after acquiring daily deal sites uBuyiBuy, Beeconomic, and Atlaspost, respectively.

And earlier this year Groupon acquired a European rival and also bought majority stakes in Japanese and Russian sites.

In acquiring its rivals, Groupon seeks to hold its place as a market leader, says Kerner.

“This is rapidly growing but highly competitive space that is still evolving,” he says. “We’ve yet to see how it will shake out but we do know that a slew of well-funded technology-driven players are competing around the world and Groupon will have to move very fast to continue to be the market leader.”

That’s because Groupon’s strength is not technology—its business model focus on making money from its e-mail list—but its strong sales force, he says. One sign of Groupon’s technology limitations showed up in a recent report that showed Groupon had the least reliable web site performance among 11 social shopping sites tracked by WatchMouse from Nov. 22 to Dec. 22, the web monitoring firm says.

The filing comes less than a month after Groupon reportedly rejected an offer from Google Inc. to buy Groupon at a price that some say may have been as high as $6 billion.

Founded in Chicago in November 2008, Groupon says it has been profitable since June 2009. Those profits are due in large part to its dramatic growth. Groupon attracted 10 million unique visitors to its web site in November, up 54% from October, according to web measurement firm comScore Inc.

Comments | 1 Response

  • It's a logical step for Groupon. With giants like Google and Amazon joining this game, money is very important for them to maintain their current market leader status. However, one of the problems Groupon facing is that it's the products or services that the buyer cares the most. With the increasing number of deals offered, buyers can just visit a daily deal aggregator like Shopway.com to check all the available deals easily. As a user, it makes absolutely no difference to me if I get an email from Groupon, LivingSocial, or ShopWay telling me about a deal, since I'm after the deal itself. With all of these clones coming up, Groupon's model runs the risk of becoming a commodity.

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