Groupon Ipo

To continue its aggressive growth strategy, Groupon executives knew they would need more capital. Without an IPO, the company would be forced to go back to its existing venture-capital and mutual-fund investors for more money (Greenfield, 2011). Eric Lefkofsky, Chairman of Groupon explained his reasoning for going public by declaring, “…the company was pretty sizable in terms of the total number of employees. There are rules that say, when you have a certain number of shareholders (500), you have to follow the same financial disclosure rules public companies do. On top of that, when you have an Internet startup, and you're often raising money from venture capitalists, you have to be cognizant of the fact that eventually at some point down the road they're going to want liquidity”.
There was a general willingness on the part of large shareholders and the board not to sell all of the stock and be part of the company going forward because the founder believed in the business model and its future (Harris, 2012). However, without added capital, Groupon would have to reduce the marketing spending that allowed it to add more than 30 million subscribers in each of the past two quarters (Greenfield, 2011). The company thus mimicked the Google Inc. strategy of a dual-class common share structure. Co-founders Lefkofsky, Mason and Brad Keywell control 100% of the outstanding Class B common stock and approximately 33.5% of Groupon’s outstanding Class A common stock, representing approximately 57.4% of the company’s voting power. Groupon sold less than 6% of its outstanding shares to the public in its initial offering. The concept was to create a “scarcity” value and drive the price higher. Groupon’s IPO originally priced at $20 per share. The strategic choice of when to go public lied in the hands of the board and management. Ultimately, given the alternatives, they decided that the timing was correct for the company to move in late 2011. The offering was met with strong... [continues]

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