Online deal site Groupon is planning on pricing its long-anticipated IPO today and officially becoming a public company tomorrow, according to reports by website AllThingsD.
The company may raise by a dollar or two the scaled-back price it announced earlier this month, valuing the company at more than $11.4 billion, down from the $25 billion considered earlier this year.
Still, the dialed-down offering under CEO Andrew Mason appears symptomatic of a generally deflated initial public offering market. According to a new report by Ipreo, which provides capital markets data and analytical services, U.S.-based initial offerings continued to lose ground to last year’s pace as only two IPOs came to market last month. That compares to a whopping 21 in October 2010.
John Demler, an analyst at Ipreo, said economic worries are still keeping investors on the sidelines. “We’ve just seen historically that it’s a gradual rebuilding process out of any IPO slowdown,” he said. “It’s not typically just flip a switch and it’s back to normal.”
The year-to-date number of IPOs for 2011 is still larger than figures for the previous year, thanks to heavy deal flow earlier in the year. But since global debt crises began roiling markets in July, IPO volume has plummeted 85 percent from the comparable year-ago period.
Groupon’s offering also indicates a growing trend of selling smaller percentages of total shares, or “float,” at the IPO. Groupon’s float was only 5.75 percent, the second-smallest since 2001. Since that year, tech deals have sold 27 percent of shares on average, but recently Zillow sold 19.19 percent of its shares, Pandora only 9.2 percent and LinkedIn a mere 8.3 percent.
Selling a small number of shares helps a company ensure enough demand to support a strong stock price and hedges against investors shorting, or betting against the stock rising, since shorting can become prohibitively expensive if the float is too limited.
“For a controversial company like Groupon, the banks may have felt like it would have been more difficult to find enough willing buyers to sell $1 billion worth of stock than to sell $500 million,” said Nick Einhorn, analyst at IPO research firm Renaissance Capital.
Some view Groupon’s tiny float as an artificial overinflation of stock value. “I think everybody plans to flip” Groupon stock, said a source familiar with the offering. “This is kind of a spectacle that people are probably going to participate in, but they probably won’t stick it out.”
Given their ability to prop up stock prices, small tech floats may be more likely to persist until the market recovers, said Einhorn. Indeed, consumer review website Angie’s List filed plans to go public yesterday, offering only 16 percent of its shares outstanding, and online gaming site Zynga, rumored to being going public before Thanksgiving, is said to be offering less than 10 percent.
The company may raise by a dollar or two the scaled-back price it announced earlier this month, valuing the company at more than $11.4 billion, down from the $25 billion considered earlier this year.
Still, the dialed-down offering under CEO Andrew Mason appears symptomatic of a generally deflated initial public offering market. According to a new report by Ipreo, which provides capital markets data and analytical services, U.S.-based initial offerings continued to lose ground to last year’s pace as only two IPOs came to market last month. That compares to a whopping 21 in October 2010.
John Demler, an analyst at Ipreo, said economic worries are still keeping investors on the sidelines. “We’ve just seen historically that it’s a gradual rebuilding process out of any IPO slowdown,” he said. “It’s not typically just flip a switch and it’s back to normal.”
The year-to-date number of IPOs for 2011 is still larger than figures for the previous year, thanks to heavy deal flow earlier in the year. But since global debt crises began roiling markets in July, IPO volume has plummeted 85 percent from the comparable year-ago period.
Groupon’s offering also indicates a growing trend of selling smaller percentages of total shares, or “float,” at the IPO. Groupon’s float was only 5.75 percent, the second-smallest since 2001. Since that year, tech deals have sold 27 percent of shares on average, but recently Zillow sold 19.19 percent of its shares, Pandora only 9.2 percent and LinkedIn a mere 8.3 percent.
Selling a small number of shares helps a company ensure enough demand to support a strong stock price and hedges against investors shorting, or betting against the stock rising, since shorting can become prohibitively expensive if the float is too limited.
“For a controversial company like Groupon, the banks may have felt like it would have been more difficult to find enough willing buyers to sell $1 billion worth of stock than to sell $500 million,” said Nick Einhorn, analyst at IPO research firm Renaissance Capital.
Some view Groupon’s tiny float as an artificial overinflation of stock value. “I think everybody plans to flip” Groupon stock, said a source familiar with the offering. “This is kind of a spectacle that people are probably going to participate in, but they probably won’t stick it out.”
Given their ability to prop up stock prices, small tech floats may be more likely to persist until the market recovers, said Einhorn. Indeed, consumer review website Angie’s List filed plans to go public yesterday, offering only 16 percent of its shares outstanding, and online gaming site Zynga, rumored to being going public before Thanksgiving, is said to be offering less than 10 percent.
