Friday, January 14, 2011

Groupon Turned Down $6 Billion, Thinks it is Worth t $15 Billion

Groupon, the social buying site that rejected a $6 billion offer from Google, is pushing ahead with plans for its initial public offering, a debut that could value the company at $15 billion or more. That would be a high multiple for a company with perhaps $1 billion of revenue.

Many have speculated that a new Internet bubble is forming. Of course, bubbles build and then burst with no warning, sometimes leading to a loss of 99 percent of equity value. That is not likely "this time around," as firms generally have some basis in revenue reality.

But whether you think a new Internet bubble is forming, or not, valuations and interest are much higher than at any point in the last five to 10 years. So we are likely to see a rush to go public. Inevitably, insiders will do well. It isn't so clear how well the public investors will do, given the passage of some time.

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