Shares of Groupon Inc surged as much as 56 percent on Friday, a solid debut aided by a small number of shares sold, yet still fell short of the first-day performances of recent Internet IPOs.

Groupon's stock closed up 31 percent but the first day pop paled in comparison to LinkedIn, the professional social network that went public in May, whose shares doubled in their debut. Real estate website Zillow also nearly doubled in its debut in July.

Groupon sells Internet coupons for everything from spa treatments to nose jobs and is one of this year's most closely watched IPOs. It has won plaudits for its phenomenal growth, but its ability to sustain that expansion in the face of intense competition from the likes of Google Inc has been questioned.

Still, a strong first few trading days could help other private Web companies -- such as Angie's List, social gaming firm Zynga and even Facebook -- pursue their own IPOs.

Groupon's offering, the largest by a U.S. Internet company since Google's in 2004, is the first major IPO since the market descended into a slump in August. There remains a huge backlog of companies that filed to go public earlier this year, then put their plans on hold.

They wanted to have a decent pop on the stock so they didn't take that much public, said David Berman, a consumer technology and retail specialist at hedge fund firm Durban Capital. They created demand by limiting supply, and they got the pop.

After a grueling year of preparing for the IPO, Chief Executive Andrew Mason -- now worth $1.2 billion with ownership of over 46 million shares -- and Chairman Eric Lefkofsky rang the opening bell on the Nasdaq, then hugged in Times Square.

Dozens of people involved in the IPO -- including bankers, investors, current and former employees -- painted a picture of the excruciating path the three-year-old Web phenom took to become the first daily deals site to go public in the United States.

We continue to be concerned about Groupon's model, especially given the low barrier for entry into this space, said Michael Yoshikami, head of money-management firm YCMNET Investment Committee. But it's a familiar name and investors tend to gravitate to familiar names at first.

The shares rose as high as $31.14, or 56 percent above the IPO price, at one point pushing the market value of the company to $19.9 billion. They closed at $26.11, 31 percent above their $20 IPO price and granting Groupon a value of $16.7 billion.

CRACKLE AND POP

Groupon put up the third-highest trading volume on the Nasdaq Friday, with nearly 50 million shares changing hands.

A spokeswoman for Deutsche Boerse AG's International Securities Exchange said it expects to list options on Groupon on November 14, with other major exchanges expected to follow suit. Options can be used to bet on the direction of stocks, or to hedge stock positions.

Groupon was founded in October 2008 and has never been profitable. In the nine months ended September 30, it posted a net loss attributable to common stockholders of $308.1 million on revenue of $1.1 billion.

Employees at company headquarters in Chicago donned lime green T-shirts emblazoned with the company's ticker symbol GRPN printed in old, ticker-tape-style lettering.

Some analysts and investors warn that Groupon's early surge could be a short-term phenomenon and its shares could reverse course and trade down like those of Internet radio station Pandora Media Inc.

There are still lingering questions about Groupon's business model and about competition from better-funded rivals such as Amazon.com Inc and Google.

Groupon has lost two chief operating officers in the past year and had to adjust its accounting twice under regulatory pressure.

Still, a small float helped drum up demand.

On Thursday, Groupon upsized its IPO and sold 35 million shares for $20 each. But that stake amounts to only about 5 percent of the company. Underwriters on the IPO were led by Morgan Stanley, Goldman Sachs and Credit Suisse.

The $700 million raised was on the larger side for a U.S. IPO, but the 5.5 percent represented the second-smallest share float in the United States in the past decade, according to capital markets data provider Ipreo.

There's a lot of excitement around the shares. But we should put this in context. The company sold 35 million shares and almost 29 million traded in less than an hour, Morningstar analyst Rick Summer said. That suggested heavy flipping, or investors selling stock they got in the IPO.

We don't think they can have 50 percent growth and make money at the same time, Summer said. They have to pay to launch new categories, get new merchants and new customers. They have to spend to grow.