LivingSocial picks banks for IPO

DEAL-of-the-day website LivingSocial, which has courted bargain-hunting consumers for the past few years, is looking to win over public investors.

DC-based LivingSocial, which competes with larger Chicago-based rival Groupon, is seeking to raise about $US1 billion from an initial public offering, valuing the Web firm at between $US10 billion and $US15bn (($9.3bn-$13.9bn), people familiar with the matter said.

The company has chosen three banks — Bank of America Merrill Lynch, Deutsche Bank and JP Morgan — as the lead underwriters for the IPO, the people said.

LivingSocial will likely go public in the fall, the people said.

A LivingSocial spokeswoman declined comment. CNBC earlier reported the underwriters for LivingSocial's offering.

The move makes LivingSocial the latest of a new crop of fast-growing Internet companies to test stock market appetite for Web offerings. Social-networking site LinkedIn, Internet radio company Pandora Media and online vacation-rental site HomeAway recently went public amid much hype. Groupon and online videogame maker Zynga also have filed for IPOs.

But LivingSocial's selection of investment bankers shows the online daily-deals industry, which barely existed three years ago, is particularly trying to capitalise on the sector's torrid growth.

Groupon last month filed for an IPO that could value it at as much as $US20bn and said in its filing its revenue in this year's first quarter was $US644.7m, up from $US3.3m in the second quarter of 2009.

Still, the daily-deal business model remains unproven.

In its filing, Groupon said it lost $US413m last year on revenue of $US713m, as it spends heavily to ramp up marketing, sales staff and acquisitions.

The deal sites typically sell vouchers for 50 per cent or more off the listed prices of goods or services at local businesses. The sites usually pocket half of the voucher's sale price.

Groupon and LivingSocial are also contending with hundreds of imitators that compete for both their customers and merchants. The smaller copycats threaten to lower the margins for the major dealers, since some offer to take less than 50 per cent of a voucher's sale price.

"Everyone is trying to get in on this small window of opportunity," said Sucharita Mulpuru, a Forrester Research analyst. "This is the point at which the enthusiasm is the highest...there's only downside if they wait."

LivingSocial launched in 2009, a year after Groupon, and is led by founder and chief executive Tim O'Shaughnessy. The company quickly expanded from its hometown of Washington, DC, to other major American cities.

The site's market share is growing. LivingSocial's share in the nation's top 30 metro markets rose from 20 per cent in April to 24 per cent in May, according to daily deal-site aggregator Yipit.

Groupon's market share fell from 52 per cent to 48 per cent in the same time period, Yipit said. Mr O'Shaughnessy has repeatedly said he expects his company to surpass Groupon in 2011.

LivingSocial's investors include Amazon.com, which invested $US175m in the company in December. Other investors include Institutional Venture Partners, Lightspeed Venture Partners, Grotech Ventures, and former AOL head Steve Case.