Groupon, the online coupon company, is scheduled to make its
long-anticipated initial public offering on the Nasdaq on Friday. And
speculation is already running rampant that the IPO could be higher than
expected.

Reuters
reported
today that shares of Groupon’s IPO could be priced $1-$2
higher than the $16 to $18 per share that has been forecast. Groupon is
planning to sell 30 million shares during its IPO.

The rumored price hike comes as a bit of a surprise considering all the
bad publicity Groupon has received in recent weeks. The SEC determined
that Groupon inflated its 2010 revenue by $400 million, and has twice
asked the company to revise its method of reporting revenue. Furthermore,
the company reported net losses in $101.2 million in June and $10.6
million in September.

The recent turmoil casts a shadow over a company that has by and large
been growing at a remarkably rapid rate. Revenue for Groupon’s September
quarter were over $430 million – more than five times the $82 million in
revenue the company reported during the same quarter last year. The
company rose to prominence in 2008 by offering customers significant
discounts on everything from restaurant meals to shoes to vacation
getaways.

Despite its lofty growth, Groupon’s spending is outpacing its (seemingly)
considerable revenue. The company’s 2010 operating expenses grew nearly
6,000 percent (!) from the previous year – nearly triple the otherwise
impressive 2,241 percent revenue gains it made in 2010. That’s why some
analysts are questioning whether Groupon’s business model is sustainable.

Its reported last-minute price hike is perhaps a sign that Groupon CEO
Andrew Mason’s recent IPO publicity tour, intended to drum excitement
about the stock, has worked. Still, with so much mystery surrounding both
its accounting practices and business model, Groupon’s IPO does not
appear to be worth the risk.

Published by Wyatt Investment Research at