Groupon looking to raise $950mn from preferred stock issuance, IPO likely to be pushed back

grouponUpdate: Groupon has raised $500-million (SEC filing) of the $950-million from various investors, including the New York City-based investment bank, Morgan Stanley (first time investor), among other partners.

The Chicago-based private and largest Internet consumer coupon service, Groupon, is planning to raise additional capital, up to $950-million by issuing new Series G preferred stock, according to a new securities court filing in a Delaware court.

Groupon would use the proceeds from the issuance to fund continuing operations and to help expand the company by entering new and emerging markets, either by acquisitions or simply by direct investment.

According to the court papers, the company changed its corporate licensing certificate to allow it to issue up to an additional 30.1-million preferred Series G which would value the firm at $4.75-billion.

Groupon works by partnering with local businesses in more than 300 cities to offer special promotions to consumers for a limited time, making it one of the best online resources for finding unbeatable local deals.

The site currently has about 36-million registered users.

Exact terms of deals with firms are kept private and vary based on the nature of the promotion and the company; Groupon normally promises firms at least a certain number of sales, in turn allowing the firms to provide deep non-traditional discounts based on larger sales volumes, essentially, it is a community that facilitates collective buying to generate volume discounts that benefit consumers with lower prices and maximize sales for participating firms who honor their end of the bargain if the minimum sales requirements are met.

The company says it has saved consumers more than $300-million to date, with that number growing rapidly.

The world’s largest online search engine, Google, recently made an unsolicited bid to acquire the company and all of its assets for $6-billion, an offer that was turned down by the company.

The recent court fillings peg the value of Groupon about $1.12-billion less than the $6-billion Google bid that ultimately failed.

The most recent round of funding Groupon secured was $135-million which was completed early in May 2010 and was led by Digital Sky Technologies.

That latest round valuated the company at $1.3-billion.

Groupon to date has received $171-million in total venture capital and angel funding.

Since the company is privately held, earnings and cash flow are not publically disclosed.

Some reports indicate the company could be generating about $500-million in total annual revenue.

As investors look for an exit and a return on their investments, an initial public offering is favored by the company and could happen as early as some time in 2011, or possibly even later, given the very high likelihood of the company raising additional capital from venture capitalists to finance operations as a result of the amended legal corporate certificate, which would push an IPO to later down the road.

Company founder Andrew Mason days ago confirmed the company was close to securing a new round of capital, but no additional information was disclosed.

We now only know that amount could be as high as $950-million.

According to a report by Forbes, Groupon, which was founded in 2008 by Andrew Mason and currently has 3,100 employees, is the fastest growing web company to date.


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Peggy holds a Bachelor Arts degree with honors in Economics from York University in Toronto, Canada. She is a Certified Management Accountant (CMA). She has also passed Level I of the Chartered Financial Analyst (CFA) Program. She is also a realtor. Write to peggy@business2press.com
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