Groupon IPO valuation to be much lower than expected

The daily deals provider was expected to go public on a valuation of between $20 billion and $25 billion. But now it appears it'll top out at $10 billion.

Daily deals provider Groupon might not go public on the inflated valuation that has been floated around over the last few months.

According to The Wall Street Journal, citing IPO analysts, Groupon might be valued at between $5 billion and $10 billion when the company finally offers its shares on the open market. Two major mutual funds that have invested in Groupon, Growth Fund of America and T. Rowe Price, have most recently valued the service provider at $9.5 billion and $8.7 billion, respectively, according to the Journal.

Those valuations stand in stark contrast to what many believed the company was worth when it filed its IPO papers in June . At that time, Groupon was expected to go public on a valuation of between $20 billion and $25 billion.

The decline in Groupon's valuation estimate is the latest bit of bad news for the company since it made its plans to go public. Last month, the company was forced to slash its reported revenue by half after the Securities and Exchange Commission took issue with its accounting practices.

The error related to the company valuing its revenue at all the cash it collected from customers before it passed out merchant fees. However, the SEC forced Groupon to restate its revenue by including only the cash the company collected itself after merchant fees were paid.

The restatement in earnings followed significant backlash from would-be investors that were shocked to learn in an S-1 filing earlier this year that Groupon tallied about $400 million in net losses in 2010.

Groupon was expected to go public in September, but after the market started to decline, the company balked at the idea. Last month, The New York Times reported that Groupon might go public at the end of this month or early November , but the company has so far not confirmed that claim.

Groupon did not immediately respond to CNET's request for comment on its valuation.

 

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