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Investors in line for Groupon payday; Endowment, mutual funds could become big winners in Internet IPO.

Pensions & Investments June 13, 2011 Byline: Barry B. Burr The Stanford University endowment and investors with Capital Guardian Trust, T. Rowe Price, Fidelity Investments and Morgan Stanley Investment Management as well as venture capital firms New Enterprise Associates and Accel Partners could gain big from Groupon Inc.’s IPO.

Groupon’s IPO prospectus, filed June 2 with the SEC, listed the $14.5 billion Stanford endowment, Palo Alto, Calif., and the managers among investors in the company. The prospectus doesn’t list a sale price or the ultimate amount it will seek to raise, analysts said.

Two of the largest Groupon investors are New Enterprise Associates, which owns 43 million class A common shares, or 14.7% of the stock, and Accel Partners, which owns 16.6 million class A common shares, or 5.6% of the stock, plan to sell an unspecified number of shares in the offering, according to the prospectus. New Enterprise bought its shares in 2008 through last year for about $14.9 billion and Accel, in 2009 for $20 million, according to the prospectus.

Stanford’s endowment, whose assets are overseen by Stanford Management Co., owns 7,332 shares of series E preferred stock, which would be converted at a 6-to-1 ratio to 43,992 shares of class A common stock after the IPO, according to the prospectus. Stanford bought the shares for $50,000 in November 2009, according to the prospectus. website groupon phoenix

John F. Powers, Stanford Management president and CEO, said he couldn’t comment about the Groupon holdings.

Capital Guardian’s America Funds Growth Fund of America owns 5,539,730 series G preferred stock, acquired for $175 million in December, according to the prospectus. The shares would convert at a 2-to-1 ratio into 11,079,460 shares of class A common stock.

The America Funds March 31 report, however, shows a holding of 3,007,282 series G preferred shares and values them at $114 million, implying a common share price of $18.95 based on the 2-to-1 conversion.

Charles “Chuck” Freadhoff, media relations coordinator of Capital Guardian Trust, parent of America Funds, couldn’t explain the discrepancy and said he couldn’t comment on the Groupon IPO.

Mr. Freadhoff said Capital Guardian values non-publicly traded holdings based on a number of fair-value factors, including the cost of the stock, prices of similar securities and business developments of the company in question.

Acquired for $100 million T. Rowe Price and Fidelity Investments each hold 3,165,559 shares of series G preferred stock, acquired for $100 million in December.

T. Rowe Price holds its Groupon shares in five mutual funds as well as other funds, said Heather McDonald, T. Rowe Price spokeswoman. She declined to comment on the impact of the planned IPO on T. Rowe Price’s holdings.

Adam Banker, Fidelity spokesman, declined to comment on the firm’s Groupon holdings, other than noting some of the shares are in Fidelity mutual funds.

Morgan Stanley Investment Management owns 2,374,170 series G preferred stock, acquired for $75 million in December, according to the prospectus. Matt Burkhard, Morgan Stanley spokesman, was unable to respond by press time.

Bill Buhr, IPO strategist for Morningstar Inc., said Groupon and its investors could sell $750 million to $3 billion in shares in the IPO. grouponphoenixnow.com groupon phoenix

Existing Groupon investors could “profit fairly handsomely” in the IPO, Mr. Buhr said. It would be “a good deal for investors that already own shares.” For institutional investors buying into the IPO, Mr. Buhr said: “I think there will be some value because there is so much interest around the company and what a good deal it could become.” He said it might be several months before the Groupon IPO takes place.

Kathleen Smith, principal at Renaissance Capital, an investment research and money management firm focused on IPOs, said lockup agreements might prevent some Groupon investors from selling shares after the IPO to realize any gains.

The IPO “will probably be” a good deal for investors, Ms. Smith said, adding, “you can’t tell until the deal is priced.”