Groupon, a rapidly growing service that offers hundreds of daily discounts in 500 local markets, has completed its biggest deal so far: a $950 million investment that will help finance its expansion and enrich its current shareholders, including some of its employees.
The infusion Groupon announced Monday come less than two weeks after the company outlined its plans to raise the money in documents filed with the Securities and Exchange Commission. At the time of that Dec. 30 filing, it already had lined up $500 million of the total.
Groupon's ability to reach its fundraising goal so quickly is the latest sign of investors' zeal for widely used Internet services that broadcast information to audiences that share common interests or friendships.
Last month, Twitter raised $200 million in an investment that valued its popular messaging service at $3.7 billion. And last week Facebook brought in $500 million from Goldman Sachs Group Inc. and other investors who believe the Internet's largest social network is already worth $50 billion just seven years after its inception in a Harvard University dorm room.
The investment frenzy has raised concerns about whether investors are becoming unreasonably optimistic about the moneymaking potential of these still-developing services.
Groupon didn't disclose the market value that its fundraising implies, but it was probably lofty. That's because the two-year-old company turned down a buyout offer of as much as $6 billion from Google Inc., according to reports by several newspapers, including The Wall Street Journal and The New York Times.
As the owner of the Internet's largest ad network, Google prized Groupon for its marketing prowess. Groupon's daily discounts now reach about 50 million subscribers in 35 countries. A pre-determined number of people have to agree to buy each deal for it to be valid.
Analysts estimate Groupon's revenue exceeded $500 million last year. Its success has spawned numerous copycats, including LivingSocial, which picked up a $175 million investment from Internet merchant Amazon.com Inc. last month.
The new investment should placate shareholders who wanted to cash out some of their holdings in the company.
Groupon, based in Chicago, said in its SEC filing that it would earmark $345 million of the new investment to buy stock back from some current shareholders. The document didn't provide details.
Groupon's early investors include New Enterprise Associates, Accel Partners and Mail.ru Group, formerly known as DST. It's unlikely that Mail.ru wants to sell its stake, given that it bought additional shares in the latest fundraising.
More than 3,000 people now work for Groupon, and most have received stock as part of their compensation.
Andrew Mason, Groupon's 30-year-old founder and CEO, could be in line for one of the biggest windfalls.
Groupon's newest investors include prominent venture capital firm Kleiner Perkins Caufield & Byers and a fund run by Web browser pioneer Marc Andreessen and a partner, Ben Horowitz. Others buying unspecified stakes are: Battery Ventures, Greylock Partners, Maverick Capital, Silver Lake and Technology Crossover Ventures.
Allen & Co, the investment bank that helped Groupon raise the money, appears to be in line for a big reward too. Groupon plans to pay a $75 million finder's fee for getting the $950 million, according to SEC documents. The filing didn't provide further details.
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