On Thursday night, Groupon will finalize its IPO, and on Friday, shares will trade under the GRPN ticker on the Nasdaq. According to a report from Reuters, it looks like the deal could price between $19 to $21, compared to earlier expectations around $16 to $18 — and at $21, that would put Groupon’s valuation at roughly $13 billion. So it looks like there’s heavy demand for the offering.
But when talking to many Silicon Valley CEOs this week, I found no one who was interested in Groupon. They are highly skeptical of the company’s business model, as well as its ability to create sustainable profits.
Despite all this negative opinion — which also has been nearly universal in the media — the IPO itself should be solid. Helping the case is that Groupon�s underwriters — Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) — cut the valuation on the deal by about half and will only issue 4.7% of the outstanding shares. It�s just a matter of normal demand and extremely short supply of stock.
But this only benefits those select investors — like wealthy people, institutions, mutual funds and hedge funds — that can get the shares at the offering price. If not, you likely will be buying at a much higher valuation. As seen with other hot offerings like LinkedIn (NYSE:LNKD), Groupon easily could spike 50% tomorrow.
For individual investors, the smart play would be to stay away and watch the circus.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
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