Bloomberg today found an IPO analyst who doesn't think Groupon can go public at a valuation higher than $5 billion. And maybe as low as $3 billion. Those figures are notable for two reasons:
Bloomberg then goes on to quote a fund manager named Michael Binger, who believes Groupon will soon regret having spurned Google: “Groupon made a mistake in not accepting that offer... Groupon would have been a very successful product within Google.”
Groupon deserves lots of blame for letting that $25 billion figure leak, but we should be a bit circumspect about the "$6 billion" Google offer. Sources at the time told me that the talks partially broke down over breakdown of up-front cash vs. earn-outs. Groupon wanted more of the former, while Google wanted more of the latter.
Let's imagine, for a moment, that the two sides reached a 50/50 compromise. $3 billion today, up to $3 billion later.
We heard that Groupon executives were confident they could hit their milestones, but these are the same executives who apparently thought $25 billion was reasonable. Moreover, were the revenue targets based on Groupon's original accounting (which didn't subtract monies given to merchants) or its new math (which does)? And what about growth slowdowns in older markets like Boston and Chicago. Did Google not differentiate between revenue growth in new markets (starting point of zero) compared to revenue growth in existing markets?
I'm not saying Groupon wouldn't have hit all of its metrics. I'm simply saying we have no idea.
Moreover, it is unclear if the earnouts would have been paid in cash or Google stock. My guess is the former, but the latter has decreased around 11% since Groupon said no. So let's go back to our 50/50 proposal, but this time the latter 50% is in stock. If all the conditions were met, the deal would have been valued at $5.67 billion.
At the same time, companies typically price their IPOs at a 10%-15% discount to where they actually expect to trade. That's why so many IPOs experience a "first-day pop." So if Groupon went public at $5 billion, it could be expected to finish the day at between $5.5 billion and $5.75 billion (i.e., higher than our hypothetical split).
We can safely say that an IPO at $25 billion would be a better deal than what Google offered. But, unless we get more specific details on the final proposal, it's impossible to say whether $5 billion is necessarily worse.
Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com