Friday, June 3, 2011

Groupon IPO

Okay, my last post was on Groupon so it may seem that I have a Groupon theme. Yes, I was thinking about Groupon when I saw an article about its IPO (initial public offering). As with my mention of LinkedIn's IPO, I think it's important to mention Groupon's. I know most small and medium businesses never make it to the IPO phase. But you can see that the IPO market is warming up again. Look at MySpace. It was purchased by NewsCorp in an environment where IPOs were difficult to do. (This means that it was difficult to obtain the desired valuation with a full subscription.) Ditto for YouTube. Those were both Internet and media darlings but the road to cashing out AND obtaining expansion capital for them was to be purchased by a large, strategic buyer.

First the IPO market opens up for the tech darlings, then it opens up for a lot of other industries. And Nasdaq (and the NYSE) are experiencing heightened competition from a few European exchanges. So I expect to see more IPOs over the next two years.

My final suggestion: If you have at least $10 million in revenue and a decent EBITDA and are looking to cash out and monetize some of your ownership in your current business, take another look at IPOs. No, most likely you wouldn't want to go public on Nasdaq but there are other, related viable options. One option is to use PIPEs (public investments in private equities). That's a discussion for another day.


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