NEW YORK — Groupon, the company that pioneered online group discounts, saw its stock rise sharply in its public debut Friday, showing strong demand for an Internet company whose business model is considered unsustainable by some analysts.
Groupon’s stock jumped $8.30, or more than 40 percent, to $28.30 Friday afternoon after earlier trading as high as $31.14. Big fluctuations are common for freshly public companies, and Groupon’s first-day rise was largely expected.
- Employees and guests of Groupon, celebrate the company’s IPO at Nasdaq on Friday in New York. CEO Andrew Mason is center rear. Groupon, the company that pioneered online group discounts, has begun trading as a public company. (AP Photo/Mark Lennihan)
Still, analysts said this doesn’t ease worries about the risks concerning the company — especially as the stock price increases.
“Until investors see the full profit model unfold over time, expect this stock to be highly volatile with increasing risk as the market cap rises,” said Kathleen Shelton Smith, principal of Renaissance Capital, which operates IPOhome.com. “The first day of trading is typically more about supply and demand. Fundamentals will take over in the long run.”
Groupon has faced scrutiny about its high marketing expenses, enormous employee base and even the way it accounted for revenue until an SEC inquiry prompted a restatement.
Chicago-based Groupon Inc. sends out frequent emails to subscribers offering a chance to buy discount deals for anything from laser hair removal to weekend getaways. The company takes a cut of what people pay and gives the rest to the merchant.
Though it’s spawned many copycats after its 2008 launch, Groupon has the advantage of being first. This has meant brand recognition and investor demand, as evidenced by its sizzling public debut.
Groupon is selling 5.5 percent of its available shares. Though not unprecedented, the amount is below that of many prominent tech companies, such as Google Inc. and more recently LinkedIn Corp., in recent years.
On Thursday, the company priced its IPO at $20 per share. That was above its expected range of $16 to $18. It gave Groupon a market value of $12.7 billion, below only Google’s among tech company IPOs. With Friday’s stock price jump, Groupon’s value rose to $18 billion.
Another Internet darling, professional networking service LinkedIn, saw its stock soar to $122.70 on its opening day in May after pricing at $45. Since then, the stock has settled lower but was still trading at $80 late Friday morning.
Groupon’s shares rose amid a decline in the broader market. The Dow Jones industrial average was down 183.91, or 1.5 percent, to 11,860.56.
The stock is trading on the Nasdaq Stock Market under the ticker symbol “GRPN.”