Publicly traded shares of the daily deal company Groupon finally made their way to the marketplace today and started off with a bang. Trading under ticker symbol (GRPN) on the Nasdaq exchange, shares soared up to 50% in the first minutes of trading. The company's IPO priced Thursday evening at $20 a share, giving it a $12.7 billion market value. This is the largest tech IPO since Google went public in 2004 with a $23.1 billion valuation.
While investor appetite seems fierce, like any IPO this is the beginning not the end of the journey and there will be many more ups and downs ahead for Groupon.
My friend and colleague Henry Blodget accurately congratulates Groupon for creating a unique and lucrative (nearly profitable) business, that didn't even exist three years ago. But once the hype of Groupon's trading debut fades, investors will closely evaluate the entire realm of opportunity and risk that lies within the ''daily deals'' industry.
Competition in this realm has grown tremendously as companies try to capitalize off consumers' desire for value. Everybody likes a good deal, and there are still some coupon-clippers among us. While Groupon didn't reinvent the wheel, they did reinvent the traditional coupon, and captured a critical component of industry worldwide; the internet user.
What's truly innovative about Groupon is the model of delivering deals straight to a person's email inbox. The company has 30 million subscribers in 45 different countries. And any business interested in reaching consumers, whether they're selling goods and/or services, whether they're national or local businesses, has caught on to this concept.
As Macke and I debate in the attached video, what ails Groupon today is also the beauty of capitalism: Any good idea will draw out new competition. Smaller competitors like LivingSocial or Gilt Group, and tech giants like Google (GOOG) and Amazon (AMZN) have all contributed to the company's falling valuation since first announcing plans to go public in June.
Groupon's trick will be managing its own success and there are already signs that the company is suffering from growing pains; that it has indeed come too far, too fast.
As a stock, Macke and I both agree it's wise to wait for more clarity to emerge before diving in a chasing a 50% first-day pop. In short, there's more to being a public company than just going public and Groupon will now have to reaffirm its growth story and earn its valuation one quarter at a time.