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Groupon flies high on its day of reckoning

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Daily deals site Groupon got off to a roaring start on its debut on the US Nasdaq stock exchange this afternoon. The company floated on the market today, selling 35m shares at an opening price of $20 (£12.50) each, to raise $700m (£437.5m). Although the initial price was higher than the previously predicted range of $16-$18, Groupon’s share price rose as much as 50% in early trading. By lunchtime in New York, Groupon shares were up by 44.5% at $28.90 (£18.04), taking the company’s market value to $18.2bn (£11.3bn). At one point the share price stood as high as $31.14 (£19.44).

Groupon’s is the largest flotation of an internet business since Google raised $1.7bn on its stockmarket debut in 2004, valuing it at $23.1bn. The sale of Groupon’s shares, around 5% of the company, puts a formal market valuation on a company that has expanded quickly across the world with its business model of offering daily deals from retailers and service providers local to its millions of subscribers.

Investors seem to have agreed with the valuation of the business over the course of today, though some commentators put that down to the scarcity value of the shares – only some 5% of the company was sold in today’s flotation.

Groupon has expanded quickly. Its model is not one that’s difficult to compete with in principle, although others may find it hard to match the speed of its expansion. Google Offers is currently available to US subscribers in beta and is set for further expansion. Google, of course, offered to buy Groupon for $6bn last year, but its offer was turned down. The investors who this January put $1bn into the company will feel very satisfied with today’s performance.

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