And it’s not just because the fast growing Chicago daily deal site turned down an offer from Google three months ago for $6 billion (or because it was valued at a mere $1.3 billion last year).
There’s some historical context that needs to be considered here — and what better company to do it with than Microsoft which just this month celebrated the 25th anniversary of its IPO.
One of the most successful high-tech firms ever to go public, Microsoft was valued at just over $700 million after its first day of trading on March 13, 1986.
Now, that was a long time ago. So, adjusting for inflation using this handy calculator, that would mean Microsoft, at the time of its IPO, would be valued at roughly $1.4 billion in today’s dollars.
Now, stay with me here (and double check my math). Microsoft currently has a market value of $208 billion, so for ease sake let’s just say that’s a 150X increase over the past 25 years.
Now, if Groupon were valued at $25 billion on its first day of trading, in order for the company to replicate Microsoft’s success in the public markets (not an easy task mind you) it would have to increase its value by more than 150 times in the next 25 years.
That would mean a $3.75 trillion valuation.
Let’s take a more recent example. Google was valued at $23 billion at the time of its 2004 IPO. It now has a value of $180 billion, so Groupon would have to surpass that figure in order to match the search titan’s success in the public markets.
Is it possible for Groupon to reach the $180 billion milestone in seven years or the $3.75 trillion level in 25 years ?
Maybe. Or, maybe not.
I am sure there were smart people back in 1986 — when Microsoft raised $61 million through its IPO — who never imagined that the company would be worth $10 billion or $20 billion, let alone $200 billion.
Microsoft, of course, had a much different mission in those early years of the PC revolution. And one could argue that the software company’s positioning was much more defensible than Groupon’s is today.
But who knows how things will play out.
Even so, Groupon will have a big hill to climb as a publicly-traded company starting out of the gate with a $25 billion valuation. And one could argue that an IPO of that size may do more to benefit the VCs and founders, and not much for the buyers of the public stock who get swept up in the IPO frenzy.
John Cook is co-founder of GeekWire, a tech news site in Seattle. Follow on Twitter: @geekwirenews.