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Sunday, November 6, 2011

What's your 12-month price target for Groupon shares? Mine - $13.00

Groupon shares surge but concerns linger

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

    Groupon Chief Executive Andrew Mason poses with his fiancee, pop musician Jenny Gillespie, outside the Nasdaq Market following his company's IPO in New York, November 4, 2011.

    Credit: Reuters/Brendan McDermid

    By Clare Baldwin and Alistair Barr

    NEW YORK/SAN FRANCISCO | Fri Nov 4, 2011 5:43pm EDT

    NEW YORK/SAN FRANCISCO

    (Reuters) - The shares of daily deals site Groupon Inc rose as much as 56 percent in their stock market debut on Friday, with at least some of the exuberance the result of the small number of shares sold.

    The shares rose as high as $31.14, or 55.7 percent above the IPO price, in early trading on the Nasdaq, at one point pushing the market value of the company to $19.9 billion. The shares later eased to close at $26.11, 31 percent above their $20 IPO price, giving the company a market value of about $16.7 billion.

    Groupon had the third-highest trading volume on the Nasdaq on Friday, with nearly 50 million trades.

    Groupon sells Internet coupons for everything from spa treatments to nose jobs and is one of this year's most closely watched IPOs.

    The offering, one of the largest in recent years, may be a barometer of investor appetite for IPOs. A strong first few trading days could help other private Internet companies -- such as Angie's List, Zynga and even Facebook -- pursue their own IPOs.

    There is a huge backlog of companies that filed to go public earlier this year. Most put their plans on hold when the stock market slumped in August. Groupon is the first major IPO since then.

    Chief Executive Andrew Mason and Chairman Eric Lefkofsky hugged in Times Square after ringing the opening bell on the Nasdaq. Employees at company headquarters in Chicago donned lime green T-shirts emblazoned with the company's ticker symbol "GRPN" printed in old, ticker-tape-style lettering.

    The company declined Reuters' requests for interviews. One employee in Chicago, who declined to give his name, said workers had been discouraged from speaking to the media. Several uniformed security guards walked the perimeter of the building, keeping an eye on Groupon workers who came outside on their cigarette breaks.

    All of the shares sold in the IPO were new, which means early equity holders may sell a portion of their stake next spring, once the 6-month lock-up period expires. It also means that, for now, Andrew Mason's newly-minted $1.2 billion remains paper wealth.

    Some analysts and investors warn that Groupon's early surge could be a short-term phenomenon and its shares could reverse course and trade down like those of Internet radio station Pandora Media Inc.

    There are still lingering questions about Groupon's business model and about competition from better-funded rivals such as Amazon.com Inc and Google Inc.

    Groupon has lost two chief operating officers in the past year and had to adjust its accounting twice under regulatory pressure.

    "They wanted to have a decent pop on the stock so they didn't take that much public," said David Berman, a consumer technology and retail specialist at hedge fund firm Durban Capital. "They created demand by limiting supply, and they got the pop."

    Michael Yoshikami head of money-management firm YCMNET Investment Committee, agreed.

    "Much of this pop is based on low float. We continue to be concerned about Groupon's model, especially given the low barrier for entry into this space. But it's a familiar name and investors tend to gravitate to familiar names at first," he said.

    On Thursday, Groupon upsized its IPO and sold 35 million shares for $20 each. But that stake amounts to only about 5 percent of the company.

    The $700 million raised was on the larger side for a U.S. IPO, but the 5.5 percent represented the second-smallest share float in the United States in the past decade, according to capital markets data provider Ipreo.

    Groupon was founded in October 2008 and has never been profitable. In the nine months ended September 30, it posted a net loss attributable to common stockholders of $308.1 million on revenue of $1.1 billion.

    A spokeswoman for Deutsche Boerse AG's International Securities Exchange said it expects to list options on Groupon on November 14, with other major exchanges expected to follow suit. Options can be used to bet on the direction of stocks, including a decline. They are often used by traders to hedge stock positions.

    Underwriters on the IPO were led by Morgan Stanley, Goldman Sachs and Credit Suisse.

    (Reporting by Clare Baldwin, Brendan McDermid, Rodrigo Campos, Edward Krudy and Phil Wahba in New York, Alistair Barr in San Francisco and James Kelleher and Doris Frankel in Chicago; editing by Derek Caney, Gerald E. McCormick, Steve Orlofsky and Andre Grenon)

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    We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
    Comments (17)
    truthtorpedo wrote:

    I refused their offer at my restaurant, its nothing but a scam.

    they never bothered to vist my restaurant, just went by online reviews, and asked me outright what was the average meal ticket, offered to sell a 1000 of those meals, and split the profit in half and pay us back in 3 equal installments over a period of a year….haha!

    Any restaurant that desperate to take their offer is either on its way down and has nothing to lose, or they have no business sense.

    I said sorry, not interested and the lady on the other end could not believe I turned her down.

    I told her, not only will i lose thousands which I can use for direct advertising in my neighbourhood, but that only dealseekers will take advantage of this and will not convert into regular buyers. People who are this thrifty will never be loyal to any brand. Why dont I give deals out on our website and keep the change? Why do I need groupon?

    Nov 03, 2011 11:51pm EDT  --  Report as abuse
    Darr247 wrote:

    Grope one turning down Google’s $6 billion offer a few months ago, and now getting less than $1 billion from the IPO, has to rank higher on the ‘buy a clue’ scale than H. Ross Perot not cashing GM’s $750 million buyout check for a month because he kept thinking they would change their minds and give him his seat on the board again.

    Back then (circa 1989), interest rates from banks were around 9%. So for the money he lost keeping that check in his pocket, he could have smoked ten $2000 cigars per day that month, lighting each one with a $100,000 bill.

    Nov 03, 2011 12:33am EDT  --  Report as abuse

    Posted via email from Randy's Stuff

    The Ad Pie Contiues Splintering

    NEW YORK (AP) — Rapper Snoop Dogg gave props on Twitter to an ad for the Toyota Sienna minivan. Actress Tori Spelling linked to a website for rental cars. And reality TV star Khloe Kardashian soliloquized about the brand of jeans that accentuates the famous Kardashian derriere.

    "Want to know how Old Navy makes your butt look scary good? Ask a Kardashian," the reality TV star wrote, or tweeted, on the social media website. Of course, she capped off the reflection with a smiley face.

    These celebs aren't just writing about family cars and fashion choices for the heck of it. Stars can get paid big bucks — sometimes $10,000 or more per post — to pontificate about clothes, cars and movies in the 140 characters or less allowed per tweet. That adds up to about $71 per character.

    Twitter, which in its five-year existence has reshaped how people shop, vote and start revolutions, is now changing the business of celebrity endorsements. Just as Match.com and eHarmony pair up singles for dates, a growing number of startup firms are hooking up companies with stars who get paid to praise products to their thousands — sometimes millions — of Twitter followers.

    The list of celebs and the things they hawk is long and getting longer all the time. The endorsements range from subtle to blatant; the celeb pairings from sensible to downright odd.

    Singer Ray J urged his 600,000-plus Twitter followers to see the horror movie "Saw 3D." Football star Terrell Owens gave a shout-out in front of his more than 1 million followers to a hotel chain giving away sports tickets: "Comfort Inn is hooking up 3 days of it!" Lamar Odom, the L.A. Lakers forward, tweeted to his nearly 2 million followers about hip-hop artist and entrepreneur Jay-Z's book "Decoded": "My man Jay-Z ... only rapper to rewrite history without a pen. Until now."

    Of course, anything on Twitter is short-lived and reaches only a small, self-selecting audience: Research firm eMarketer estimates that only 11 percent of U.S. adult Internet users are on the micro-blogging site. And even though some celebs have faithful groups of followers, it can be hard to measure whether their tweets lead people to spend.

    Still, celeb tweets can be a way to grab an audience at a time when many people skip TV commercials using their digital video recorders. And paying a celeb to tweet is much cheaper than a traditional advertising campaign. Want a tweet from Khloe Kardashian? That will cost about $8,000, according to prices listed by social media marketer Izea. Looking for a cheaper option? Ray J is about $2,300.

    Companies like Izea, Ad.ly and twtMob usually pair products with celebs through a combination of software algorithms and Hollywood instinct. The companies say they use many metrics to gauge the effectiveness of a paid tweet, such as the number of times it gets reposted by others.

    When Ad.ly got Charlie Sheen to tweet for Interships.com in March, the actor was in the midst of getting fired from his sitcom "Two and a Half Men" over accusations of hard partying and drug use. Within an hour of Sheen's first post, Internships.com got more than 95,000 clicks.

    "I'm looking to hire a (hash)winning INTERN with (hash)TigerBlood," tweeted Sheen, who had just recently signed up for Twitter and now has more than 5 million followers.

    Dan Smith, vice president of marketing for the website CampusLIVE, which helps advertisers connect with college students, hired Izea to help him get a celebrity to tweet about his company. Izea gave him a short list, which included names like "Jersey Shore" reality TV star JWOWW, comedian Michael Ian Black and rapper Bow Wow.

    Smith polled his interns and they picked Lindsay Lohan, the actress most famous for her run-ins with the law. According to Smith, CampusLIVE paid Lohan about $3,500 for one tweet: "These challenges for college kids on (hash)CampusLIVE are SO addicting!"

    The post to Lohan's 2.6 million fans drove about 4,500 clicks to the website, Smith said. But he also said he wasn't sure if he'd use her again — not because of her troubles, but because he's already tapped her fan base. His interns wanted to know if comedian Will Ferrell is available. Said Smith: "That would be a cool one to get."

    For the record, Ferrell isn't on Twitter, says his spokesman, Matt Labov, who adds that the Twitter handles sporting his name are "imposters."

    For her part, Lohan on her own time tweets about topics like fulfilling her community service sentence. But she has also posted comments for Izea on a few occasions, the company says. Her tweets about wind energy ("While saving the world ... save money! I love it!") and about a gold mining company ("R ur savings safe? Think again!") were paid endorsements, according to Izea's website.

    Those posts, along with the CampusLIVE tweet, included the characters "(hash)ad" at the end, which indicates that a post is a paid endorsement. But Lohan's publicist, Steve Honig, says that Lohan does not "sell" her tweets: "She uses Twitter to communicate with her fans and let them know what she's up to."

    Like any endorsement, celeb tweets come with the risk that a star's behavior will not coincide with the company's image. And of course, there's a science to picking the right one: Will consumers buy that their favorite rapper drives a minivan?

    Twitter generally allows the paid tweets, as long as they're posted manually and not automated by a computer program. The Federal Trade Commission suggests endorsers end their tweets with the (hash) symbol, called a hash tag, and the letters "ad" or "spon," short for "sponsored by," to clarify that they're ads.

    "The more transparent you are with your audience on Twitter, the more powerful that connection is," said Rachael Horwitz, a company spokeswoman.

    Ed Aranda, a 27-year-old graphic designer and copy writer in Erie, Pa., doesn't like celebs mining their fans' trust to sell a product. Still, he thinks those reading the tweets should take responsibility.

    "If you can't tell snake oil when it's being sold to you," Aranda said, "then you probably deserve what you're buying."

    ___

    AP Business Writer Michelle Chapman contributed.

    Quick question....do you think Twitter dollars are coming from an increase in ad budgets or diverting from another medium?

    Posted via email from Randy's Stuff

    Tuesday, November 1, 2011

    TV & Mobile Working Together

    In the old days, you’d hear a song on TV, scramble to remember a few lyrics, Google them and then download the song on iTunes — if you’re lucky enough to find it. But the music-identification app Shazam is driving iTunes downloads on its own, and as they’ve provided us the chart below, TV can play a big role.

    HBO is known for their musically significant series finales that bring songs back from the dead. When the final moments of Entourage concluded on September 11th and Led Zeppelin’s “Going to California” played, viewers punched up their Shazam apps and tagged it (identified it) nearly 25,000 times:

    With 150 million users, 1.3 million downloads per week, 2.5 billion songs tagged (8% buy the song according to Shazam) is the company ready to become the most powerful social TV app, now that they’ve raised money specifically to do so? David Jones, Executive Vice President of Marketing for the company says they already are. “We’re making television ads interactive,” he explains. “We know the precise time” a user Shazam’s during a TV ad, which he says, “can help the media buyers or agency” spend more effectively.

    “We know interest level, and we can get that data back so they can shift spend around and get more out of television advertising,” Jones describes. Shazam recognizes the billion dollar business that makes the TV business what it has become and for now feels the solution is improving the engagement with the ad spots that we all know still run strong during our favorite programming.

    Jones described that when they work with brands to make Shazamble ads, there’s “a setup fee and cost per impression or fixed price, similar to rich media ad campaigns.” He says the initial setup is between, “$50k-$100k,” and that “some are spending hundreds and hundreds of thousands because it’s effective.”

    Their first advertiser, Old Navy, came together in six weeks when the company asked if they could do something for them with their commercials. “27% went deeper with the Old Navy commercial,” Jones said, enabling Shazamers to unlock exclusive content since the spot had been infused with Shazam’s audio recognition technology. eBay, Geico, Capital One and Old Navy are now some of the company’s biggest advertisers.

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    Posted via email from Randy's Stuff