Online Retail Discounter Groupon Raises $500 Million

Groupon, an e-commerce site dedicated to providing group discounts of up to 70% with specific retailers, restaurants and other small businesses, announced that it has raised $500 million in an exempt stock offering, including $334 million used to reimburse the company for buying stock of its founders Andrew Mason and former AOL executive Ted Leonsis, according to a recent report filed with the Securities and Exchange Commission.

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The filing did not identify buyers, but indicates Groupon intends to raise a total of $900 million. The company has been entering three to five new U.S. markets a week with its service, which negotiates group discounts of 40-70% with retailers, restaurants and other businesses and posts them on its website. If enough people sign up for the deal, it activates. The service will also sell its daily deals via e-mail or post them to subscribers Facebook accounts.
The model harnesses social networking by providing consumers an incentive to spread the word virally with their freinds to ensure enough people sign up to activate the deal. It is being watched closely by specialty retailers and marketers because it harnesses the web to send traffic to local brick-and-mortar businesses rather than online retailers.
Earlier this month Groupon spurned an unsolicited offer by Google to buy the private company for $6 billion. The company is expected to pursue an initial public offering.