NEW YORK — Online coupon seller Groupon Inc. is discounting its expectations for its first stock offering.
The company, which offers consumers daily deals targeted to their city and preferences, now expects net proceeds of about $478.8 million from its initial public offering of 30 million shares.
Groupon said that it expects to sell the IPO shares for between $16 and $18 per share. That implies a valuation for the entire company of $10.1 billion to $11.4 billion. The stock offered in the IPO represents only about 5 percent of Groupon.
The expected terms, unveiled in a regulatory filing Friday, scale back initial plans for an IPO worth $750 million. The company also disclosed third-quarter financial figures that showed it is getting closer to profitability.
Longtime IPO analyst Scott Sweet, the owner of IPO Boutique, said Groupon is now expected to go public the first week of November.
The company’s IPO, one of the most anticipated offerings of the year, has been beset with questions about how it accounts for revenue and its business model, as well as a weak market for stock offerings.
Groupon has also seen some top-level departures recently, announcing last month that its chief operating officer, Margo Georgiadis, had gone back to Google, where she worked before joining Groupon in May. This came about six months after Groupon’s previous COO, Rob Solomon, left the company.
Early last month a report in The Wall Street Journal said Groupon was reconsidering when to go through with its IPO “on a week by week basis.” The source said Groupon had previously expected to price its IPO in the middle of September. Setting expected terms means the offering itself could take place in the next several weeks.
Groupon, which rejected a $6 billion takeover offer from Google Inc. last year, disclosed in the filing that its revenue has grown from $1.2 million in 2009’s second quarter to $430.2 million in the third quarter of this year.
140 million-plus subscribers
The Chicago company also said its subscriber count jumped from 152,203 as of June 30, 2009, to 142.9 million as of Sept. 30. It added that 29.5 million of those members, about 20 percent, had actually purchased Groupons through the third quarter’s end. About 16 million of those had purchased more than one Groupon.
In a letter addressed to potential shareholders, CEO Andrew Mason said Groupon spends a lot acquiring new subscribers and that it is constantly reinventing itself to keep up with merchant demand. But Mason was blunt that there were potential risks for investors.
“We have yet to reach sustained profitability and we have no shortage of competition. Our path will include some moments of brilliance and others of sheer stupidity. Knowing that this will at times be a bumpy ride, we thank you for considering joining us,” Mason wrote.
Groupon has made some foolish errors, analyst Sweet said, ranging from its accounting difficulties to Mason sending a memo to employees during a quiet period.
“You are watching a company that at one time had a lot of demand. All of that luster is gone,” he said.
Sweet said Groupon’s roadshow, which is expected to start next week, will likely be contentious.
“This will not be like an earnings report where people are high-fiving each other. This will be balkers and stalkers. They will face serious questions,” he said.
For the three months ended Sept. 30, Groupon narrowed its net loss of $10.6 million on revenue of $430.2 million on lower marketing spending. That compares with a loss of $49 million on revenue of $81.8 million in the same period last year.
The company said in the filing that it does not plan to pay dividends for “the foreseeable future.” Instead, Groupon plans to keep all of its earnings to finance operations and expand.
Groupon was founded about 2 1/2 years ago by Mason and Eric Lefkofsky. It started as a side project to another website called The Point that helped raise funds for various causes. Mason is one of Groupon’s largest stockholders with more than 23 million shares.
Both Mason and Lefkofsky have faced their share of scrutiny, whether it be for the memo Mason sent or when the company privately raised $950 million in a pre-IPO back in January, according to a filing at that time. Sweet said that approximately $800 million of that went to the company’s employees and investors, with Lefkofsky getting about $319 million.
Class A and Class Be shares offered
Groupon said that after the offering it will have Class A and Class B shares, with Class A stockholders entitled to one vote per share. Class B stock will get 150 votes per share. Outstanding Class B shares will represent about 36.3 percent of the voting power of Groupon’s outstanding stock following the offering.
The structure will give the company’s principal shareholders, a group of 13 people including Mason and Lefkofsky, 58.4 percent of the voting power.
The company is giving the underwriters the right to buy up to 4.5 million more shares of Class A stock to cover any excess demand. The expected proceeds from the offering are based on the midpoint of the expected price range.
Groupon expects to list its Class A stock on the Nasdaq under the ticker symbol “GRPN.” Groupon plans to use the proceeds for working capital and other purposes, including potential acquisitions. It has made 19 acquisitions since May 2010.
Groupon also has a large employee base, with more than 10,400 workers. In comparison, Facebook — which started in 2004 — has approximately 2,500.