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Groupon’s Strikeouts Reveal an Unspoken Truth

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Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#41

Post by shareme »

jeremymims wrote: post #9

Groupon has more than 100 million subscribers (mostly in America). If we assume that the total available market is another 50 million or so signups in the US, then these loss leader marketing expenses will drop dramatically (no need to offer $10 for a friend that buys a $5 deal). The attempt of this metric is to explain what their business looks like in another year or so when they've reached some level market satura…

Yes, but there is a big difference in the Amazon way which was to own the LOSS and report it the SEc way and Groupon's way of actually LYING..

Look back at the Amazon founder statements during the loss years than look at Mason's now..

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#42

Post by JoeBracken »

guildchatter wrote: post #28

After all this negative press, I'm really curious how much of a pop Groupon's IPO will have.

Nothing - they are going to make a killing in the IPO regardless. The general public is not paying attention to this detail and the bankers have more money to make by downplaying this press and pumping up the stock.

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#43

Post by [deleted] »

damoncali wrote: post #39
sc68cal wrote: post #34

Earlier quoted context omitted.

Or their business model is to sell irrational exuberance and cash out before anyone notices. Don't forget that they hid $36.2 million in stock-based compensation as part of this accounting trick.

"Hid" is a strong word. They're basically trying to sell this idea: "We won't need much marketing, nor will we be offering significant equity compensation in the future. Acquisitions are a "one-time" thing. Therefore, our long term profitability is looking pretty good." We, as investors, are welcome to accept that reasoning or not. I think it's pretty weak. Others will disagree. But it's pretty plainly stated. (If an…

[deleted]

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#44

Post by sc68cal »

damoncali wrote: post #39
sc68cal wrote: post #34

Earlier quoted context omitted.

Or their business model is to sell irrational exuberance and cash out before anyone notices. Don't forget that they hid $36.2 million in stock-based compensation as part of this accounting trick.

"Hid" is a strong word. They're basically trying to sell this idea: "We won't need much marketing, nor will we be offering significant equity compensation in the future. Acquisitions are a "one-time" thing. Therefore, our long term profitability is looking pretty good." We, as investors, are welcome to accept that reasoning or not. I think it's pretty weak. Others will disagree. But it's pretty plainly stated. (If an…

In addition to requiring a full reconciliation to GAAP, the SEC’s disclosure rules for nonstandard financial metrics require companies to provide “a statement disclosing the reasons why the registrant’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the registrant’s financial condition and results of operations.”

Frankly, if the SEC (who makes the Keystone Kops look serious) is giving them a hard time about this non-standard financial measure, it is not simply that investors "are welcome to accept the reasoning or not"

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#45

Post by kirsty »

sc68cal wrote: post #34
joshklein wrote: post #33

Without more telling numbers around customer behavior, these numbers aren't particularly relevant. What we really need to know is what their customer churn is - what percentage of merchants use the service again? What percentage of consumers use the service again? If their churn is very low, the adjusted CSOI numbers are interesting to look at (once acquired, customers stick around for awhile and have a positive life…

Or their business model is to sell irrational exuberance and cash out before anyone notices. Don't forget that they hid $36.2 million in stock-based compensation as part of this accounting trick.

It is common practice among listed companies to strip out stock-based compensation charges, acquisition-related charges and other non-cash charges as part of their financial information. [1] Their argument for this is generally because these charges are seen as "accounting mumbo-jumbo" by the rest of the world rather than real costs incurred in the running of the business.

I agree that stripping out marketing costs to acquire customers is harder to understand in this way and would seem to be somewhat out of the ordinary.

[1] for example ARM Holdings plc is listed on LSE and NASDAQ and shows its Q2 earnings press release with "normalised" figures quoting as being based on IFRS, adjusted for acquisition-related charges, share-based payment costs, restructuring charges, profit on disposal and impairment of available-for-sale investments and Linaro™-related charges http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#46

Post by jeffdavis »

raganwald wrote: post #24
jeremymims wrote: post #9

Groupon has more than 100 million subscribers (mostly in America). If we assume that the total available market is another 50 million or so signups in the US, then these loss leader marketing expenses will drop dramatically (no need to offer $10 for a friend that buys a $5 deal). The attempt of this metric is to explain what their business looks like in another year or so when they've reached some level market satura…

it's insane not to see that marketing expenses will drop and that they can be comfortably profitable. Look, projections based on assumptions are part of the investing game. And while I appreciate your enthusiasm, the likelihood that you are correct is not the point. The point is, there is already an existing method of disclosing assumptions and projections for the future, it's called a pro-forma financial statement .…

"Look, projections based on assumptions are part of the investing game... Giving us a new number for what their business looks like now is ridiculous"

A thousand times, yes!

Investors need baseline, objective, bottom-line numbers to work with. These numbers help potential investors evaluate where the business is at today, and (perhaps more importantly) help current investors evaluate whether the past projections met with reality.

There are plenty of places that companies are able to spin the numbers to tell their story of fabulous fortunes and world conquest. But there are certain places where you have to let the tried-and-true numbers speak for themselves without someone standing in front waving their arms.

It's like going to vegas. It's easy to say: "Hey, I about broke even. Even if I did lose a little money on the tables, I got some free drinks and I had fun this weekend." Sometimes that story is true, and sometimes they are some pretty-darned expensive free drinks. Your bank account will tell the story, and you wouldn't let a casino owner jump in front to "help you interpret" the numbers.

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#47

Post by tedunangst »

raganwald wrote: post #11
dodo53 wrote: post #6

I don't really get why it's a big deal. They have to report the normal net loss, and the amount and categories of things they're excluding is public knowledge so why does it matter if they decide to come up with a possibly not-useful metric - isn't it Invetor-Beware on whether to consider that metric or not?

Imagine, if you will, a one-hundred page prospectus. One hundred pages of facts twisted beyond all manner of reason, with pie crust promises of castles in the sky. Buried within those pages are the SEC-mandated numbers you need to compare this company to any other company trading on thhe exchange. Now imagine every company does this, but each in their own way with their own entirely orthogonal way of presenting their…

I believe you meant GAAP numbers, but I thought numbed was also a good word. :)

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#48

Post by damoncali »

sc68cal wrote: post #44
damoncali wrote: post #39

Earlier quoted context omitted.

"Hid" is a strong word. They're basically trying to sell this idea: "We won't need much marketing, nor will we be offering significant equity compensation in the future. Acquisitions are a "one-time" thing. Therefore, our long term profitability is looking pretty good." We, as investors, are welcome to accept that reasoning or not. I think it's pretty weak. Others will disagree. But it's pretty plainly stated. (If an…

In addition to requiring a full reconciliation to GAAP, the SEC’s disclosure rules for nonstandard financial metrics require companies to provide “a statement disclosing the reasons why the registrant’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the registrant’s financial condition and results of operations.” Frankly, if the SEC (who make…

That's a technicality. Would you be satisfied if they tacked on a statement that said, "We think this is an important metric because it shows our current profitability given the exclusion of non-recurring startup costs." or whatever version of that that the SEC finds acceptable?

Granted, I'm speculating as to their pitch as to why this is relevant, but the numbers are exceedingly clear to any investor who reads it, regardless of their spin (or lack of spin).

Do we really want financial statements packed with management's perspective on why the numbers are important? There is a balancing act there as well. The more you demand explanation, the more you invite abuse and salesmanship into what is supposedly a factual report.

Too little explanation and you get a frustratingly difficult to read report. Too much, and you may as well be reading a marketing brochure.

In the grand scheme of financial shenanigans, this one barely registers. At worst, it's a poorly explained, weak argument aimed at painting a pretty picture of the company.

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#49

Post by VladRussian »

kirsty wrote: post #45
sc68cal wrote: post #34

Earlier quoted context omitted.

Or their business model is to sell irrational exuberance and cash out before anyone notices. Don't forget that they hid $36.2 million in stock-based compensation as part of this accounting trick.

It is common practice among listed companies to strip out stock-based compensation charges, acquisition-related charges and other non-cash charges as part of their financial information. [1] Their argument for this is generally because these charges are seen as "accounting mumbo-jumbo" by the rest of the world rather than real costs incurred in the running of the business. I agree that stripping out marketing costs t…

Groupon stripping out "discretionary online marketing expenses that are incurred primarily to acquire new subscribers” is akin to airline stripping out fuel costs as "discretionary expenses that are incurred primarily to acquire new miles".

Anyway, for example, during its last years, the well known large company i worked at, was steadily posting near neutral quarters on non-GAAP, excluding one time charges, basis. The only thing is that each quarter there would be at least a one "one time charge" that would result in the quarter being deep in red. Not surprisingly at all if one understands that the life and business in particular is just a sequence of one time events :)

(there is of course a very reasonable use of one-time charges - if company generates a profit, then good accountants would dig out some "one time charges" that would allow to decrease/avoid the profit tax)

Re: Groupon’s Strikeouts Reveal an Unspoken Truth

#50

Post by ahi »

pbhjpbhj wrote: post #26
adriand wrote: post #7

Earlier quoted context omitted.

> and we are still figuring out if the daily deals model is profitable and sustainable. Well, we're certainly finding out that the daily deals model is profitable for web developers and assorted startups. Hardly a day goes by without hearing about some new Groupon clone, and the number of web developers who are making money from clients who want to build Groupon clones has to be pretty high. It reminds me of a few ye…

From what I've seen now, including being a mark of Groupon's, I think that Groupon amounts mainly to preying on small businesses that don't quite have the nous to realise that it's a bad deal to give up all your profits to Groupon (or whoever) in order to win an enlarged customer base filled with bargain hunters who cost you everytime you serve them. Hyperbole for sure but not that far off I think.

In the first web bubble, there was a lot of investment into companies giving stuff away at a loss. Eventually we all got too smart for that. Now there is a lot of investment into companies getting other companies to give stuff away at a loss. Just as unsustainable, but it'll drag out a bit longer before we all figure it out.
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