The Avanti Group the equities research house based in Tokyo, providing professional trading and investment research solutions to institutional and private investors across the globe have recently drawn their investor’s attention to recent developments within the online discount retail sector.

Coupons.com Inc, the online discounter whose business model saw coupon clipping become part of the internet in 1998, saw its shares almost double in value during their debut with the company raising $168 million in IPO, with its shares priced above the marketed range. Coupons.com’s stock surged 88 % to a value of$30 per share, giving the company a market valuation of approximately $2.2 billion. The company which had sold 10.5 million shares for $16 each, after initially offering them for between $12 and $14 per share based on a company valuation of $1 billion.

The Mountain View, California based Coupons.com generates earnings each time a consumer downloads one of their offered coupons for redemption at a number of large retail institutions. Although the company has remained without annual profit since at least 2009, its sales rose 50% to $168 million in 2013, up from the $112 million it accrued in 2012, according to regulatory filings the company released for its initial public offering. Net income of $1.5 million was received by Coupons.com for the three month period ending on December 31 last year and was the last financial release included in its IPO filling.

“Although very well received by the market, COUP is not really a well performing company by any stretch of the imagination and this has brought back some well placed worries that investors have had hidden away since the first Dotcom bubble, that is as more and more well valued internet concerns are conducting IPOs this year inevitably some chaff will be caught up in the excitement, whether or not that is applicable to Coupons, it might be too early to say,” said a Senior Analyst and Researcher at The Avanti Group.

The IPO of Coupons.com was managed by Goldman Sachs, Allen & Co and featured Financing from both Bank of America and the Royal Bank of Canada. The largest shareholder in the company remains Passport Capital LLC, the hedge fund controlled by John Burbank, which holds a 19% with T. Rowe Price Group Inc the second largest owning 10% of the online discounter. In 2011 a $200 million infusion from institutional investors saw Coupons.com reach a valuation of $1 billion.

“Niche internet companies like Coupons.com have a pretty good track record of performing well in the markets at least initially, the problems however surface when investors begin to appreciate that there is very little depth or room to expand within this niche and when a newer competitor comes along decline in share value is both inevitable and usually dramatic. To put it simply there are far better vehicles for those seeking to invest into internet based IPOs this year from companies whose valuations are under realized and have the scope to expand,” concluded the Senior Analyst and Researcher at The Avanti Group.
The Avanti Group is an equity research house providing research and analysis outsourcing solutions for institutional financial traders worldwide, founded in early 2003.