Going public – Groupon and others – .Coms crash still fresh in memory

Back to back, internet companies are approaching stock exchange to raise funds from public. Take a view of daily deal companies and local business reviewer sites and you will notice a considerable slide towards the capital market. WHY? A question may be asked.

Before moving on, it is essential to know the basic objective of stepping forward to a bourse. Normally, commercial organizations knock at the door of primary market to improve their liquidity conditions primarily for balancing, modernization, and replacements (BMR).

Unquestionably, when a company plans to float financial instruments to generate funds through initial public offering (IPO), it has to build credibility and repo in shareholders-to-be. Tom, Dick, and Harry cannot pick up a single penny from public out there in town.

Of late, Groupon, the trailer blazer in the couponing industry that introduced the innovative online group buying concept, succeeded in raising $700 million from Nasdaq. With a ticker symbol GRPN, the group buying website ranked just next to Google in raising funds in the fraternity of internet companies.

Google Inc., the leading internet search engine, is the uncontested internet company so far with having made a record of generating $1.7 billion back in 2004.

Groupon IPO was oversubscribed to the surprise of observers. However, analysts do not consider the developments as unusual.

“What determines whether a deal is "hot" or not is not whether the deal is oversubscribed but how oversubscribed it is,” said Henry Blodget at Business Insider.

Next in line was Yelp that recorded an average 61 million visitors and 22 million reviews during July-Aug 2011.

The San Francisco-based local business reviewer has filed S-1 with the Securities and Exchange Commission (SEC) to raise $100 million. It had rejected the buyout offers of $500 million apiece by Google and Yahoo in 2010, according to Cnet.

Earlier, Amazon sold out $54 million of its shares while two of its affiliated companies Pets.com and Drugstore.com raised $76 million and $90 million respectively by floating stocks in the capital market.

The comparison of figures can let Groupon stand out among its peers notwithstanding their being engaged in different kinds of businesses. One thing is common in all however.

All are b2c online portals dealing out specials to consumers. Google is the giant with market capitalization of nearly $200 billion. Therefore, a comparison turns out incompatible.

Marketing and advertising costs of b2c internet companies are constantly on the rise as customer acquisition and subsequent retention are not a cakewalk. The regulator has given slaps on the wrists of a number of internet companies for their skyrocketing marketing spends. Groupon spent $613 million on marketing in the nine months ending September 2011.

The public response to initial offerings by cyberspace businesses notably fledgling discount websites is surprising for many. A horrible episode of dot com bubble burst lies fresh down the memory lane.

Obviously, past can be inhibited from repeating itself. Hopefully, SEC must have devised an efficient mechanism in the light of a lesson from the history.

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