Groupon Inc. is seeking a valuation of about 5 times projected 2012 sales in its initial public offering, people familiar with the plans said, making it more expensive than Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT)
Advisers to Groupon based the asking price for the IPO on a projection that the company will have sales of about $2.1 billion next year, said the people, who asked to remain anonymous because the figures are private. The $17 midpoint of Groupon’s IPO price range would value the company at $10.8 billion, or about 5 times that sales prediction.
That means unprofitable Groupon would be more expensive than Amazon.com, the world’s largest online retailer, which trades at about 1.6 times estimated 2012 revenue. It also would be pricier than Microsoft, the biggest software maker, which has a price-to-sales multiple of 2.9. Being the first online daily deals company to tap the U.S. market may help justify the valuation Groupon seeks, said A.B. Mendez, a senior research analyst at GreenCrest Capital Management LLC in New York.
“Public equity investors, both institutional and retail, have been relatively starved for investment access to social media and social commerce companies,” Mendez said in a phone interview. Groupon is “a name a lot of retail investors already know very well and want to own,” he said.
Google Inc. (GOOG), which Groupon names alongside Microsoft as a competitor in regulatory filings, has a projected price-to-sales multiple of 5.2.
Julie Mossler, a spokeswoman for Chicago-based Groupon, declined to comment.
The IPO terms also value Groupon at about 11 times estimated 2013 earnings before interest, taxes, depreciation and amortization of just under $1 billion, two of the people said. Revenue in 2013 is projected at about $2.9 billion, one of the people said.
Underwriters make forward estimates for companies’ revenue and earnings that they use internally for determining appropriate valuation levels for IPOs. The projections are not shared publicly.
Groupon, which generates revenue from online sales of coupons that offer discounts on products and services, is seeking to raise as much as $540 million in its IPO, selling 30 million shares of Class A common stock at $16 to $18 apiece. The company is currently meeting with potential buyers and plans to complete the offering on Nov. 3, Bloomberg data show.
The comparison with Amazon is based on the company’s closing share price of $227.15 yesterday. The company’s stock tumbled in late trading after it reported third-quarter profit that missed analysts’ predictions.
Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group AG are leading Groupon’s offering. The stock will trade on the Nasdaq Stock Market under the symbol GRPN.
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