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September 7, 2011 12:40 am
Groupon and Zynga, the most closely watched among the next wave of consumer internet companies expected to go public on Wall Street, have pulled back from selling shares this month amid a spike in market turbulence.
According to people familiar with the deals, Groupon, the online coupon-seller, and Zynga, a maker of games for Facebook and other platforms, had pencilled in debuts shortly after the Labor Day holiday, traditionally a busy time for initial public offerings in the US.
The two companies this summer had filed plans in time to go public in early autumn, hoping to capitalise on a wave of investor excitement for consumer internet companies this year after a rousing Wall Street debut for LinkedIn and a soaring private-market valuation for Facebook.
But with markets remaining volatile, both have cooled on plans that would have seen them early this month mount “road shows”, the marketing trips in which companies promote their shares to institutional investors ahead of an IPO. The companies declined to comment.
Groupon had already run into trouble with its IPO after a leaked internal e-mail last month from its chief executive that some feared could fall afoul of Securities and Exchange Commission rules preventing companies from publicly discussing their business in the “quiet period” before an IPO.
However, a person familiar with Groupon’s deliberations said that it had been the stock market volatility of recent weeks that had eventually led it to pull back from an immediate share sale. The company still “plans to launch when conditions are right”, according to another person source close to the deal.
Meanwhile, a person close to Zynga indicated that the social gaming company had also become more circumspect about its plans for a rapid IPO, while dismissing suggestions that the company had earlier set a firm deadline for the share sale. “There’s this magical timetable that everyone’s holding Zynga to,” this person said.
The delays of such marquee companies could be painful for the US IPO market, which has 120 companies waiting to sell shares, more than the 115 this time last year, according to Ipreo, a capital markets data and services provider. Zynga is the largest deal in the pipeline, seeking to raise $1bn. Groupon is seeking $750m.
“The constituencies that want to see these types of deals happen are extremely vocal and powerful. For them to get pushed back, that’s indicative of how challenging it is out there right now,” said Reuben Daniels, managing partner at EA Markets, a capital markets advisory.
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