Is Groupon (GRPN) really that valuable?

The market says that Groupon ($GRPN), which IPO'd today with an opening valuation of $18 billion, is worth more than Macys ($M), Ralph Lauren ($RL) or the Chicago Mercantile Exchange ($CME).

But let's look at this so-called "valuation" for a moment.  Groupon has broken at least one record - the smallest public float ever for an IPO, just 4.7% of the company's shares came out this morning, 30 million.  If a company sells less than 5% of itself to outside shareholders, is it even a public company at all?

The valuation the company has garnered today is based on the false scarcity of social media stocks in general and available shares of Groupon in general.  If and when the company tries to really float more stock (or when the insider lockup expires), we shall see what the company is really "worth".When I was a kid, I had a massive collection of baseball cards and comic books.  One day I got that book which listed all the "values" of each card and it blew my mind how rich I was.  I raced down the hallway to my dad and showed him all prices.  "I have three Ken Griffey Jr rookie cards, Dad!  In perfect condition!  They're worth a thousand bucks each!"

He smiled and said to me "No they're not."

"Whatddya mean?  Here, look - this says it right here, $1000 for his Topps rookie year card."

"No, Josh.  It doesn't matter what the book says.  It is only worth what someone is willing to pay for it."

"But..."

"Take it to the baseball card store, see if they'll buy it for $1000.  Then take it to another store and another.  What they're actually willing to buy it for is what it's worth, not what the book says."

Years later I took a box from my comic book collection to Madison Square Garden for a show, my intent was to get liquid.  I learned this lesson all over again.  It didn't matter what the book said The Amazing Spider-Man number 7 was worth (second appearance of The Vulture!), it was only worth what the buyers were willing to pay for it (not much).

Only when Groupon sells a meaningful amount of stock will we find out what's the company is really worth.  Until then, it's shares are just a baseball card price in a book.

 hat tip on valuation data Michael Antonelli