NEW YORK/SAN FRANCISCO (Reuters) – Groupon Inc faces its toughest sales pitch next week when the daily deals website launches a roadshow to persuade investors to buy shares in its initial public offering.

Even after scaling back the issue and cutting the company's valuation in half, the IPO may struggle. Aside from recent regulatory and operational bumps, investors and analysts are troubled by Groupon's business model.

The concept is simple and potentially lucrative: sell a coupon for a local business and take a cut of the proceeds for facilitating the deal. But the market has attracted hundreds of rivals, including well-funded giants such as Google Inc (GOOG.O) and Amazon.com Inc (AMZN.O). Even Facebook was a Groupon rival for a short while before it shut down its effort.

"My views have not changed, despite the reduced valuation. We still have significant long-term questions about their business model," said Michael Cuggino, who helps manage about $15 billion at Permanent Portfolio Funds in San Francisco.

"They will get a lot of very hard questions from investors focused on their business outlook and profit expectations," Cuggino said, adding he would not be attending the road show and is "nowhere near" investing in Groupon.

Other investors said they were intrigued enough to attend the roadshow, but saw the IPO price as still on the high side.

Groupon plans to sell 30 million shares, or less than a 5 percent stake, at between $16 and $18 each, raising up to $540 million, according to a regulatory filing on Friday.

The midpoint would value Groupon at $10.8 billion, far less than the $20 billion initially expected but still above the $6 billion that Google offered to pay for the company last year.

"Groupon is an impressive business, but it's coming with a pretty rich price tag," said Ryan Jacob, manager of the Jacob Internet Fund, who watched Groupon's roadshow presentation online this morning.

"They're still young enough that the price seems too high to us — even at the reduced level," Jacob added. "There's impressive growth potential but a lot of risks."

David Berman, a technology and retail specialist at hedge fund firm Durban Capital, said he would attend the roadshow but has reservations about the IPO.

"It's a big part of the puzzle in terms of the future of retail. Whether it's a good model and priced right is another matter," he told Reuters.

"The big issue for me is competition. Are there barriers to entry?" Berman added. "The other question is repeat business. It's one thing to buy a Groupon once and visit the merchant, but are customers coming back again and again?"

NEW BUSINESSES

Rather than address the question of when it might start turning a profit — a key issue for investors — Groupon executives in the online version of its roadshow described how they are trying out new businesses, such as travel deals and selling discounted products online.

"We've just started doing these things in the last few months," said Chief Executive Andrew Mason. "We're finding our customers are buying at the same kinds of conversion rates as they do with local. We've been able to translate this audience because we have this trusted brand."

The company launched Groupon Live, a partnership with Live Nation (LYV.N) to offer discounted concert tickets; Groupon Getaways, its travel business; and Groupon Goods, the discounted product market, in the third quarter.

"These are expected to grow and become a larger part of Groupon's overall business," Chief Financial Officer and former Amazon executive Jason Child said. "The success of these new categories greatly increases our market opportunity."

While the Chicago-based company's revenue and sales staff have grown dramatically since its founding in October 2008, it has never been profitable on a net basis. It made a narrower operating loss in the third quarter, after excluding stock-based compensation.

"There are a lot of beat up Internet stocks that are profitable. This one isn't," said a manager of a Bay Area tech-focused investment firm.

He said he would look at Groupon but didn't feel like he had to own it: "A $20 billion valuation is completely ludicrous. Ten billion is still too much."

The investor didn't want to be identified because he planned to meet with Groupon.

(Reporting by Alistair Barr in San Francisco and Clare Baldwin in New York; editing by Carol Bishopric)

BOSTON (Reuters) – Top hedge fund managers went bargain hunting in the oil patch in the second quarter, buying shares whose prices had fallen because of BP’s Gulf of Mexico well disaster and lower oil prices.

Top managers including billionaire Carl Icahn, Eric Mindich and Dinakar Singh, whose stock picks are closely watched in investment circles, added energy stocks to their holdings as billions of gallons of oil gushed into the Gulf, according to quarterly securities reports filed on Monday.

Others buying energy shares included David Einhorn, former Fidelity Investments star Jeff Vinik and the $22 billion Boston-based fund Adage Capital.

Fund managers must say what U.S. listed equities they owned within 45 days after the quarter ends.

While energy stocks ranked among the worst performers during a quarter that also featured a still unexplained flash-crash and fresh fears that the U.S. economy would recover more slowly, hedge fund managers staked out the sector much like they had with financial firms earlier in the year.

After building his energy holdings slowly at the beginning of the year, Icahn picked up the pace in April, May and June by committing nearly $1 billion to the sector after the Deepwater Horizon drilling platform at BP’s (BP.L) Macondo well exploded and sank in the Gulf of Mexico.

The purchases included 2 million shares of oil and gas producer Anadarko Petroleum (APC.N) and 240,000 shares of offshore drilling specialist Ensco PLC’s (ESV.N) sponsored American Depository Receipts, according to documents submitted to the Securities and Exchange Commission on Monday.

Icahn also added 2.4 million shares of NRG Energy (NRG.N), a big power utility.

Dinakar Singh’s hedge fund TPG-Axon bought 1.4 million shares of Anadarko, while adding 2.1 million shares of drilling services specialist Baker Hughes (BHI.N) and 3.5 million shares of Halliburton (HAL.N), another major oil services player.

Mindich, whose skills at Goldman Sachs helped him raise a record $3 billion when he started his fund in 2004, bought 1.3 million shares of BP and call options to buy 1 million more.

Mindich’s $13 billion Eton Park Capital also bought 168,000 shares of Baker Hughes, 165,000 shares of Diamond Offshore Drilling (DO.N), 300,000 shares of Forest Oil (FST.N), 256,000 shares of Marathon Oil (MRO.N), 420,000 shares of Plains Exploration & Production (PXP.N) and 237,000 shares of Suncor Energy (SU.TO).

Vinik added 3.1 million shares of Exxon Mobil, 11,000 shares of Ensco and 2 million shares of the Oil Services HOLDRS Trust (OIH.P), which owns a basket of 15 stocks in the sector.

Einhorn’s Greenlight Capital bought 7.4 million shares of Ensco, just over 5 percent of the company’s shares. Ensco “was not involved in the horrible accident, which should not materially impact the company’s long-term potential,” Einhorn wrote in a letter to his investors last month.

Adage, run by former managers from Harvard University’s endowment, owned 3.4 million shares of BP at the end of the quarter, up from 124,000 three months earlier. The firm added to existing positions in Anadarko, Ensco and Halliburton.

The bets mark a dramatic change in their portfolios, coming as many other investors pulled their money out. BP’s stock price fell over weeks until its value had fallen by half.

Even prominent mutual fund manager Fidelity Investments, where millions of Americans hold their college savings and retirement accounts, appears to have joined the trend.

Fidelity managers added 24.2 million shares of Exxon, leaving it with 74.9 million shares, making it the fifth biggest holding for Fidelity. It also added 10.9 million shares of BP.

The forms managers filed on Monday include only U.S.-listed equity securities and related derivatives. Bonds, other securities and short positions are typically not disclosed. Managers may also omit U.S.-listed equities under certain circumstances or file some holdings on confidential filings.

(Reporting by Svea Herbst-Bayliss and Aaron Pressman. Additional reporting by Emily Chasan in New York and Ross Kerber in Boston. Editing by Robert MacMillan)