Groupon's Biggest IPO Road Show Test Yet

With a week left before pricing its long-watched initial public offering, Groupon executives, led by CEO Andrew Mason, will round out the first leg of road showpresentations in front of an estimated 300 investors at Manhattan’s St. Regis hotel Friday.

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Mason & Co. will run through the daily deals site’s burgeoning business model, financial soundness and growing competitive landscape.

Those speculating that demand is waning for the 5 percent of the company being offered should remember that Goldman Sachs is leading the offering’s underwriting. Should Goldman get the lead role for Facebook’s jumbo deal, investors will want to be looked upon favorably for a slice.

As order books await, here is what investors will be watching:

Valuation: It’s no secret that Groupon’s valuation has shrunk from what was once thought to hit $25 billion. The most recent target range of $16-to-$18 a share would value the company between $10 and $11 billion.

Recent secondary market valued the company at roughly $9 billion, according to market participants, where they once were roughly $19 billion.

Fluff: CEO Andrew Mason told investors in Boston, earlier this week, that he planned to replace the bottom 10 percent of the sales force, which could curry favor to worried investors. Companies growing at exponential rates must often hire at similar rates, leading to lower screening benchmarks.

Competition: Groupon’s presentation doesn’t hide the Achilles heel that is a landscape with 1,000-plus competitors in a field with low barriers to entry.

Yipit data for market share for the consumer deal world show a seesaw between Groupon and LivingSocial, and Amazon Offers looks set to catch up if its growth keeps skyrocketing.

Margins: Competing for the best vendors and the most favorable deals no doubt can come at a cost to margins. Industry analysts have questioned how much LivingSocial took home from its $10 million Whole Foods deal; similarly, Groupon’s ability to maintain merchants allowing them stable margins is no guarantee.

Newfound “Stability”: Many retail and institutional investors will see their purse strings loosened as the last day’s accord in Europe has lifted their books—as well as previous moods toward stringency.

One large retail-trading site said they were already seeing interest in Groupon similar to what they saw earlier in the year with LinkedIn, which famously propelled that stock to a first day gain of more than 100 percent.

Conversely, Growth: Groupon’s road show hinges long-term growth on a nascent product called Groupon Now!—a real-time flash sale for mobile customers and the vendors around them.

Only problem is that both subscriber and revenue growth are leveling; not to mention some of Groupon’s other, outperforming products could be under-invested.

Groupon is expected to price its IPO next Thursday, November 3. If all goes well, it will begin trading on the Nasdaq the following day.