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A Coupon on Groupon in IPO

Groupon's updated filing doesn't change its fundamental argument for a multi-billion dollar valuation -- exponential growth in customers, revenue and deals products since 2009. The price cut reflects both growing risk aversion in markets, increased competition in online deals, questions about the stickiness of its services with consumers and businesses and growing expense.

At issue is the pace of the rate of growth in Groupon's sold and its revenue per subscriber. From the second quarter 2009 through the fourth quarter of 2010, the company more than doubled its Groupons sold every quarter. In the final quarter of 2010, it sold more than 16 million Groupons. Since the end of 2010, it's taken 9 months to double its Groupons sold to current levels of 33 million. The company also made $15.9 per each email subscriber when it only had a smattering of 152,203 subscribers in June 2009. With its exponentially larger 142 million subscribers, the company now only earns $3.3 on each.

Still in the more than two years of data that the company's now reported, there are positive signs. On average, Groupon is now selling 4.2 Groupons to repeat customers up from 3.3 sold to customers in June 2009. Additionally, its revenue per Groupon sold has increased to $13, its highest reported level ever and an increase in profitability of 25% from June 2009. The question is whether Groupon's sales growth puts it in a position to be profitable once expenses to grow the reach of its business.

In the first nine months of the year, Groupon increased its marketing expense six-fold to $613 compared with the same period in 2010. Additionally, its revenue for each email subscriber fell to $3.3, a 15% drop. The company now also has more than 10,000 employees after a push to grow in the U.S. and internationally.

Since June, Groupon delayed its IPO - announcing in September it would wait out market volatility and further show its earnings abilities to investors. After concerns of accounting in its initial filing, the Chicago-based online deals site recalculated its 2010 revenue in a September filing that cut sales in half to $313 million, and showed a $223 million loss in the first six months of 2011.

Meanwhile, the company appears to be pushing ahead because of a growing revenue and subscribers and narrowing losses. It's also a signal that frozen IPO markets are thawing.

Last week, Ubiquity Networks (UBTN), a broadband wireless network infrastructure provider sold just over 7 million shares at $15 apiece. In the weeks leading to its first day of trading, Ubiquiti cut its price expectations from over $20 a share to a range to $15 to $17. It was the first IPO since Sep. 1 when real estate investment trust American Realty Capital (ARCP) sold just over 5.5 million shares for $12.50 a share.

According to quarterly data from Dealogic, Global IPO activity has totaled $142.5 billion so far in 2011, down 8% from last year's equivalent total.

When Groupon sells shares in its IPO, Morgan Stanley (MS), Goldman Sachs (GS) and Credit Suisse (CS) will be its lead underwriters.

-- Written by Antoine Gara in New York
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