I can't wait for the hype to dwindle and the stock to crash
If "independent analysts such as Morningstar Inc. have valued Groupon at as little as $5 billion", this is for a good reason. And according to my own valuation:
1- poor execution in several key international markets (e.g. ranked #10 in China, #4 in India)
2- fierce competition encouraged by an easily replicable business model
3- a dual-class share structure
4- dubious reasons behind this IPO
For the record, my valuation - based on fundamental analysis assuming Groupon's withdrawal from China and a quick turnaround in other international markets - came to $4.8-$6.2 billions ($8.22-$10.25 per share), still at a premium compared to some other companies such as eConversions (in the UK).
There will always be a debate on the "value" of a company, but I can't resist to give you an extract of my report on the latter two items listed above:
<< A notable risk to public investors comes from the dual-class share structure designed for Groupon's founders to continue controlling the company with 58.1% of the voting power, yet less than 35% of the outstanding shares. In our opinion, this fosters poor corporate governance and should have been avoided.
We also question the reasons behind this IPO. Groupon stated that net proceeds of this offering will not be used to fund operations during the next 12 months. About 85% of the $1,113 million from past private sales of common and preferred stock were used to redeem shares, hence the press's accusation that Groupon is a Ponzi scheme. We expect this IPO to serve the same purpose of transferring wealth from new public investors to existing stockholders. The fact that very little equity is made available to public investors - a common way to maintain a steep valuation in an IPO - reinforces that sentiment. >>
The latter paragraph refers to the float that is so small (Groupon only offered 5.5% of its capital to the public) in order to push up the price per share - following the law of supply of demand. Obviously, every sale of a new block of stock will have the opposite effect.
And when people realize that Groupon has no competitive advantage (thanks to an easily replicable business model) and never manages to turn a profit in the most populous, highest growth markets of China and India, the stock will crash.
I can't wait.