Groupon IPO May Value Stake Held by Chairman Lefkofsky’s at $2.3 Billion

By Lee Spears, Douglas MacMillan and Ari Levy - Oct 22, 2011 6:39 AM GMT+0700

Groupon Inc. founder and Chairman Eric Lefkofsky may parlay a $1 million check to co-founder Andrew Mason four years ago into a stake worth $2.3 billion when the daily-deal site sells shares to the public next month.

Lefkofsky owns 129.2 million common shares, according to the company’s prospectus, at least double the amount owned by Mason or fellow co-founder Bradley Keywell. New Enterprise Associates, the earliest venture backer, may see its $10 million investment grow more than 100-fold, to $1.57 billion.

Groupon’s market value would be about $11.4 billion following the IPO, less than half the size the company reportedly discussed with bankers earlier this year. Still, a decision to reject a buyout bid in 2010 from Google Inc. that would have valued the Chicago-based company at $6 billion may have paid off. At the high end of the price range, the founders’ combined 34 percent stake would be worth $3.9 billion on paper.

“We’re not where we were a few months ago, but we’re still talking about double what Google offered to pay,” said Anupam Palit, senior equity analyst at New York-based GreenCrest Capital Management LLC, which researches private companies.

Mason’s stake in Groupon may be valued at as much as $845 million, while Keywell’s share may reach $742 million, according to a regulatory filing today. Investors that have put money into Groupon since its inception have paid an average of 31 cents a share for their stakes, the filing shows. The high end of the $16 to $18 offering price range implies an average 58-fold gain for current holders.

Venture Backing

Venture capitalists have led more than $1.12 billion in investments in Groupon since 2008. New Enterprise Associates, which owns 87.5 million shares, paid $4.8 million in 2008. That investment valued the startup at about $30 million, filings show. The firm, which has offices in Chevy Chase, Maryland, and Menlo Park, California, invested another $10 million in November 2009, and received a $4.9 million dividend from the company the same month, according to the prospectus.

Accel Partners, with 33.2 million shares, may see its stake valued at as much as $598 million, according to the prospectus. Palo Alto, California-based Accel led a $30 million round in December 2009, in which New Enterprise Associates also bought shares, Groupon said in a statement at the time. Accel was the first venture investor in Facebook Inc.

Groupon’s implied market value, in addition to being almost twice as much as Google sought to pay for the company in December 2010, is more than double the implied valuation in the latest round of financing.

Voting Power

In January, Groupon raised $950 million from investors including Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and private-equity investor Silver Lake. That valued Groupon at about $4.75 billion, people with knowledge of the matter said at the time.

Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

While the three co-founders will collectively own more than a third of Groupon’s common stock, they will also share more than 58 percent of the voting power by virtue of the Class B shares they own, which carry 150 votes apiece. Class A stockholders get a single vote per share.

Groupon traces its roots back to a $1 million check Lefkofsky gave to Mason in 2007 to convince him to drop out of graduate school and found a company called The Point, a site that helps people raise funds and build petition lists for activism. That inspired Mason to try another site, Groupon, based around the idea of collective buying.

While Internet companies have seen their shares surge following U.S. IPOs this year, and LinkedIn Corp.’s stock is almost double its offering price, they have not all held their value. Online music provider Pandora Media Inc.’s stock has dropped 5.4 percent since its IPO, while Yandex NV, the owner of Russia’s most popular search engine, has trimmed its gains to 6 percent. At one point, Yandex had climbed as much as 55 percent.

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Tom Giles at tgiles5@bloomberg.net