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Groupon Seeking $950 Million Investment

December 29, 2010

Groupon Inc. has been authorized to raise up to $950 million in what would be the biggest round of equity financing by a company since Pixar in 1995.

Groupon said in a filing with the state of Delaware that it intended to sell shares at $31.59 each.

VC Experts, a research firm that specializes in providing data on private companies, told Reuters that price would put Groupon at a value between $6.4 and $7.8 billion, depending on the number of shares issued.

Groupon sends members daily emails with steeply discounted deals from local merchants.  The deals are activated when a certain number of people agree to make a purchase.

Groupon said in the filing that the shares will automatically be converted into common stock if the company goes public.

The document was filed on December 17.

Groupon’s backers include Digital Sky Technologies, which also is an investor in Facebook.

The move for new funding comes a month after reports that Groupon was in talks to sell itself to Google Inc. for $6 billion.

Michael Wolf, director of management consulting firm Activate, said that there may be high demand for the offering because Groupon is seen as a hyper-growth company whose best days are ahead of it.

“People look at it as a business that will be worth considerably more in the future,” he told Reuters.

Several analysts say that Groupon needs to raise money to expand quickly because there are a few barriers to entry in its field and rivals are fast approaching.  The New York Post reported last week that Google is looking to buy smaller competitors LivingSocial and BuyWithMe.

“Groupon is probably looking to get out and build a moat around their operations as soon as possible,” Peter Falvey, co-head of tech banking for Morgan Keegan, told the Post. “That’s going to be expensive.”

Just Byers, head of business intelligence for VC Experts, told Reuters that the $950 million authorization was the biggest his firm had seen in the last 20 years.  He said that recent record had been Pixar’s 1995 authorization of about $500 million.

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