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Groupon Heads to Wall Street

Groupon IPO story updated with analyst/expert comments.

NEW YORK (TheStreet) -- Taking advantage of the bull market for young, social media-oriented tech firms, Groupon, the Chicago daily deals site that has seen rapid growth and a increasing valuation over the past year, filed its IPO paperwork late Thursday afternoon.

The IPO, expected to raise as much as $750 million, comes less than a month after LinkedIn (LNKD) made its spectacular Street debut.

Groupon, leader in the crowded daily deals space, filed its S-1 Thursday.

"The Groupon IPO is riding the wave of the success of LinkedIn, which shows there's a lot of demand for market leading social media stories -- nobody needed this filing to prove there is buzz around this space," said Nick Einhorn, research analyst at Renaissance Capital. "I don't think that Groupon will necessarily be valued compared to LinkedIn ... they're different types of companies."

According to its filing, the Chicago company posted a massive net loss of $420.3 million last year on $713.3 million in sales, due largely to a huge hiring spree. In less than two years, the company has grown to 7,107 employees from 37.

Some analysts find Groupon's losses troubling, especially for potential investors. "Groupon is a story about tremendous growth, not a story about profitability," said Sucharita Mulpuru, principal analyst at Forrester Research. "This one smells even more of 1999 than LinkedIn. The question now is would you invest in the business? Investors are going to be saying, is this a sustainable business like IBM (IBM) or is it a trend?"

Groupon bulls point to the firm's enormous subscriber growth. Groupon said it has 83.1 million subscribers as of March 31 -- a big jump from the 1.8 million it had at the beginning of 2009.

"The Groupon filing legitimizes the space," said Jere Doyle, CEO of daily deals company Eversave. "It's really a business that's a market landscape changer."

Groupon, which will trade under the ticker GRPN but hasn't yet specified an exchange, is the crown jewel of the so-called daily deals market along with closely-held rival Living Social. The two comprise some 90% of this market, according to Jeremy Liew, a managing director at Lightspeed Venture Partners in Menlo Park, Calif. and a LivingSocial investor.

Late last year, Groupon famously rejected Google's (GOOG) $6 billion takeover offer.

In a letter to prospective shareholders included in the IPO filing, CEO Andrew Mason offered a taste of some of the quirky origins the company embraces.

"After selling out on our original mission of saving the world to start hawking coupons, in order to live with ourselves, we vowed to make Groupon a service that people love using," Mason wrote. "Expect us to make ambitious bets on our future that distract us from our current business. Some bets we'll get right, and others we'll get wrong, but we think it's the only way to continuously build disruptive products.

"We are unusual and we like it that way ... Life is too short to be a boring company. Whether it's with a deal for something unusual, such as fire dancing classes ... we seek to create experiences for our customers that make today different enough from yesterday to justify getting out of bed."

Proof of whether or not Groupon marks a smart tech investment -- or just some more froth in a bubbly young tech market -- will only come with time. "The big milestone for the tech sector will be on the pricing date more than today's filing date, as then we'll all have a better sense for how the public markets truly value of one of the current generation of Web leaders," said Rob Ward from Meritech Capital. "We're at least 3 months away from pricing, so it's far too early to even guess. The IPO market in the fall could be entirely different."

--Written by Scott Moritz in New York, with additional reporting by Olivia Oran.



Follow the writers on Twitter at TheStreet_Tech

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