They say hindsight is always 20-20.
And in retrospect, spurned suitors such as Google Google Inc (NASDAQ:GOOG) by Groupon Inc (NASDAQ:GRPN) and Microsoft Corporation (NASDAQ:MSFT) by Yahoo! Inc. (NASDAQ:YHOO) are probably thanking their lucky stars that their offers were turned down.
In this 2010 report, Groupon Inc (NASDAQ:GRPN) CEO Andrew Mason rejected Google’s $6 billion offer, which included performance incentives, as they wanted to go the route of an IPO instead. It seems now to have been a bad move, and Google Inc (NASDAQ:GOOG) is likely smiling.
Cut to 2012, and post-IPO, we have Groupon Inc (NASDAQ:GRPN)’s shares quoting at $4.80 and a market cap of $3.14 billion, about half of what Google offered in 2010. To be fair, Groupon is not alone, with Facebook Inc (NASDAQ:FB) and Zynga Inc (NASDAQ:ZNGA) giving it company in post-IPO share price implosions. Groupon Inc (NASDAQ:GRPN) is now down 82% since its IPO.
What does cause concern is the fact that long-time backers of the company are jumping ship. According to this report in the WSJ, at least four Groupon investors from the pre-IPO times, including Marc Andreessen, have been selling their Groupon holdings. Andreessen sold out his 5.1 million shares once lock-in periods expired in June. Similarly Maverick Capital Ltd, a hedge fund, has reduced its holdings in Groupon from over 6 million shares in March to less than two million shares currently. Mutual fund Fidelity Management also reduced its holdings by about one-third between April and June. Kinnevik, a Swedish investment firm sold out its 8.38 million shares in June, ostensibly because it tends not to hold on to minority positions.
It appears that there were differences in opinion within Groupon about the IPO with several investors and consultants advising against it. The company nevertheless went ahead with the IPO. CEO Andrew Mason comments on this issue by saying that in the ultimate analysis the board decided, unanimously, to float the IPO.
Notably, and on the other hand, the market’s bleak perception of the company’s fortunes is really not shared by investors such as venture-capital firm Kleiner Perkins Caufield & Byers. According to Mary Meeker, partner at this firm, “Groupon has materially exceeded our expectations in nearly all key business drivers, including revenue, customers and Groupons sold, and the company has met our expectations for free cash flow,” in the period after the firm invested in the January 2011 funding round.
Again, marquee investors such as Morgan Stanley and T Rowe Price Group, have in fact increased their holdings after the IPO – Morgan Stanley has doubled their holdings in the April to June quarter, while T Rowe has tripled their investment in that period.
It may well be that the stock has been oversold, and possibly due to some unfair reflected glory from Facebook and Zynga.
It could well be a value buy at these levels, considering that the much-maligned Q2 results of the company nevertheless show revenues growing 45 percent to $568.3 million on a y-on-y basis, while billings were $1.29 billion, up 38 percent on a y-on-y basis. Interested, Google?