In a hefty act of concession, LivingSocial has accepted another $110 million in emergency investments at the expense of its earlier backers. In exchange for the loot, the new investors get annual dividends of three percent – guaranteeing them a slice of the pie before earlier backers reap any proceeds. Barring liquidity, the deal-a-day giant must repay this round of financing within four years.
Along with Groupon, LivingSocial has suffered from market fallout in the daily deals industry. Three years ago, the respective companies ranked first and second in their sector. But when Groupon suffered a two-thirds plummet after going public in 2011, the ripple effects hurt the valuation of its chief competitor.
Accounts have varied on LivingSocial’s current state of affairs, with tech analysts weary of the company’s ongoing profitless streak. Following a $650 million loss during 2012, the once-mighty company laid off 400 employees.
In a PrivCo report issued last week, LivingSocial Chief Executive Officer Tim O’Shaughnessy supposedly referred to the matter as debt financing – a statement later retracted from the CEO himself. Consequently, a public dispute took shape between the private data firm and the troubled deals company.
The now-infamous report that was issued by the firm listed a slew of onerous terms that basically spelled imminent doom for LivingSocial. O’Shaughnessy disputed the report on numerous counts, asserting that its insider revelations were given by imposters. However, PrivCo CEO Sam Hamadeh has stood by the contents contained in the report – which he claims was approved by LivingSocial spokespeople.
Regardless, LivingSocial has undergone a $3 billion valuation drop over the past year. After selling 7.5 percent of itself for $110 million in the last round, the company is currently worth $1.5 billion – down from a high of $4.5 billion several rounds ago. Nonetheless, O’Shaughnessy asserts that this latest investment will provide what his company needs to soar once again in the deals market.
Source: The Chicago Tribune