How to play it: Groupon and high-profile IPOs

Mon Nov 7, 2011 10:34am EST
 
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By Ryan Vlastelica

NEW YORK (Reuters) - The online coupon company Groupon raised $700 million after increasing the size of its offering, which priced at $20 per share, above an initial range. The company was valued at about $13 billion when the IPO priced -- about half of earlier estimates.

Groupon's IPO had been hotly anticipated by investors, partly because it is among the first public social networking companies. The demand may have been pumped up further by the small portion of the company being sold.

The percentage of the company being sold was just 5.5 percent, the second smallest since 2001 and well below the average of about 38 percent, according to capital markets data provider Ipreo.

Social networking is viewed as a sector that will dominate online activity in the future, and some, like yet-to-be launched Facebook, show huge money-making potential. But many are skeptical of Groupon's business model and its ability to generate long-term profit and revenue growth. Regulatory pressure has led it to change its accounting practices twice in the past year. At the same time, the company also lost two operating chiefs.

Here are a few ways to play the IPO and social media:

DON'T GET YOUR GROUPON YET

Groupon's IPO came with a tiny float representing just over 5 percent of the company. That helped drive up demand, leading to an opening day "pop" that may not last, analysts said.

Groupon debuted on Nasdaq on Friday, with its stock rising as much as 56 percent and with the company approaching $20 billion in market capitalization.   Continued...

 
<p>Groupon Chief Executive Andrew Mason poses with his newly married wife, pop musician Jenny Gillespie, outside the Nasdaq Market following his company's IPO in New York November 4, 2011. REUTERS/Brendan McDermid</p>