Handle Your Business

In the biggest stock market debut for a tech company since Google’s (GOOG), Groupon enjoyed a sizzling reception Friday despite the market’s broader tumble over more Greek worries.

The Chicago daily deals service saw its shares gain more than 30 percent on its first day as a public company — likely speeding the way for Web startups here in Silicon Valley that have been waiting to go public.

“This is a watershed listing,” said Bob McCooey, a Nasdaq senior vice president who oversees initial public offerings of stock on the exchange.

Groupon sold 35 million shares at $20 apiece, setting its initial market value at $12.7 billion. It finished the day with a market cap of $16.5 billion. Mountain View-based Google had a valuation of $23.1 billion when it went public in 2004.

Groupon is the second of the “Big Five” social media companies to go public, following LinkedIn’s impressive May debut. San Francisco social gaming startup Zynga is expected to follow suit later this month and Facebook early next year, with Twitter probably waiting until 2013.

Valley tech executives and venture capitalists are hoping the social media IPO wave will swell, sweeping other tech companies to newfound riches along with it.

Despite Groupon’s heady numbers, some observers were inclined to take the soaring IPO with a dose of salt. They noted that the company sold only about 5 percent of its shares in the offering — a supply-and-demand tactic to drive up their value and, by extension, the remaining 600 million shares the company chose not to sell. Skeptics also wonder about the company’s long-term sustainability amid flagging sales and growing competition in the online coupon business.

But given that nearly 200 companies, including about two dozen in Silicon Valley, have filed to go public on U.S. stock exchanges but not yet done so, “I can’t imagine that this doesn’t give them some confidence to make the leap between now and the end of the year,” said McCooey.

Groupon’s shares — trading on the Nasdaq under the ticker symbol GRPN — zoomed upward after hitting the open market just before 8 a.m. Pacific. The stock opened at $28 and at its peak topped $31. Though it fell in the final hour of trading, its closing mark of $26.11 was still a 31 percent increase from the IPO price, and it appeared to be holding steady in after-hours trading.

The day made an instant billionaire of Andrew Mason, Groupon’s 31-year-old, hoodie-wearing founder and chief executive.

Eric Lefkofsky, the company’s chairman, fared even better: His 129 million shares of Groupon make him, on paper, the 85th richest man in America, according to Forbes estimates, worth almost $4 billion.

Valley venture capital firms New Enterprise Associates and Accel Partners are also big holders of Groupon stock.

Although company officials were limited in their comments about the stock’s performance due to Securities and Exchange Commission rules, Mason in a blog post thanked investors, employees and customers. “With our IPO behind us, I couldn’t be more excited about what lies ahead,” he wrote.

Groupon’s Palo Alto offices, at which it employs more than 100, were notably subdued Friday morning. A few employees passing in and out of the nondescript building wore a “business as usual” mien while declining comment.

The company launched in 2008, e-mailing subscribers daily deals from local merchants selling everything from meals to massages to messenger bags. Groupon takes a cut of what people pay and gives the rest to the merchant.

The company has expanded to more than 200 markets in 45 countries but is making significantly less revenue per subscriber than before thanks to growing competition.

In addition, Groupon was forced to delay its IPO — and report dramatically lower revenues — in July after the Securities & Exchange Commission raised concerns about its accounting practices.

“There have been some real major red flags,” said Andrew Stoltmann, a securities lawyer in Chicago whose offices are just three miles from Groupon’s.

Still, one of the most anticipated and hotly debated initial public offerings of the year garnered the cash-starved company $700 million. That’s expected to grease the skids for other Internet firms that have been waiting to go public amid an extended market slump.

“I believe that today we’ve reached the tipping point,” said McCooey.

That Groupon performed so well despite broad concerns about its management and busienss model also will make it easier for second-tier tech companies to go public, said financial analyst Sam Hamadeh.

The CEO of PrivCo.com, a New York firm that compiles financial data on private companies, noted that while a juggernaut like Facebook can launch an IPO no matter the Wall Street climate, “A lot of people were waiting to see if this thing went through. You’re defintiely going to have “B” and “C” companies rushing to do it.

“And if they don’t perform well,” he added, “that could ruin it for everybody else.”

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