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LivingSocial Ditches an IPO — for Now

Daily deals site opts to strive for $400 million in private channels


LivingSocialIn the daily deals business, it’s mostly a race between Groupon (NASDAQ:GRPN) and LivingSocial, which soak up most of the share in key markets in the U.S. and Europe. But to keep up the momentum, these operators need lots of money. It’s certainly not cheap to build large-sales organizations and carpet-bomb the Web with advertising.

Of course, in Groupon’s case, it chose the IPO route and raised a cool $805 million. But LivingSocial will take a different approach — it wants to remain private for now. To this end, LivingSocial is trying to raise up to $400 million in a venture round, according to a recent filing with the Securities and Exchange Commission.

Living Social already has collected $176 million. JPMorgan Chase (NYSE:JPM) and Code Advisors are handling the process — and collecting some juicy fees. The total funding could take by the end of the first quarter of 2012.

LivingSocial has plenty of good reasons to avoid the IPO market. As seen with the Groupon, an offering can expose a company to extremely negative media attention. Not to mention it’s a process that can be highly distracting for a management team.

And even with the recent rally, the equities markets remain quite volatile. Again, just look at Groupon. During the past month, the stock has gone from a high of $31.14 to a low of $14.85. Now the stock is at $21.15, which is 5% above its IPO price.

Despite all this, it looks like private investors are not as skittish and are willing to be generous on the valuation for LivingSocial — which appears to be $6 billion. The company’s existing investors include long-term players like Amazon (NASDAQ:AMZN), Institutional Venture Partners, Lightspeed Venture Partners, T. Rowe Price (NASDAQ:TROW) and Grotech Ventures.

However, LivingSocial’s problem will be catching up with Groupon, which has a well-known brand and a larger footprint. At the same time, other competitors — especially Google (NASDAQ:GOOG) — are trying to beef up their operations in the business. LivingSocial needs the money to keep up — and fast.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.

Article printed from InvestorPlace Media,

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