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Groupon Prices I.P.O. at $20 a Share

dealbook.nytimes.com

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Re: Groupon Prices I.P.O. at $20 a Share

#11

Post by tadfisher »

pbreit wrote: post #5

Of all the naysayers, the Hacker News community seemed to be one of the most consistent. I'm curious why that is? Is it because Groupon doesn't look ostensibly too technical? Is it a general disdain for commercial success? Is it for perceived arrogance? Is it a lack of business acumen?

Nope; it's mostly their ethical void. The business boils down to temporarily delaying payments to merchants, in the meantime reporting those payments as revenue. This inflates the value of the company and misleads investors into believing their business model is more viable than it actually is.

On the flipside, their customers (merchants) are reporting that they do not see the conversion rates that Groupon advertises to lure them into a deal. In response, they try things like raise their prices prior to honoring a deal, which further dilutes the value of Groupon's product.

Re: Groupon Prices I.P.O. at $20 a Share

#12

Post by wavephorm »

jerf wrote: post #9

Putting aside the questionable nature of Groupon's IPO discussed ad nauseum here, this trick of only selling a very small part of the company in the IPO to keep price high by restricting supply seems, for lack of a better word, strange. So, I buy some stock at a price inflated by the lack of supply as the company puts 5% of itself out there. For the supply-restricted price to make sense, though, I have to believe tha…

I'm pretty sure when a company does additional "public offerings" they typically issue new shares and dilute their existing shares rather than sell them. It's just easier, and more smoke-and-mirrors, just the way Wall Street likes it.

Re: Groupon Prices I.P.O. at $20 a Share

#13

Post by byrneseyeview »

jerf wrote: post #9

Putting aside the questionable nature of Groupon's IPO discussed ad nauseum here, this trick of only selling a very small part of the company in the IPO to keep price high by restricting supply seems, for lack of a better word, strange. So, I buy some stock at a price inflated by the lack of supply as the company puts 5% of itself out there. For the supply-restricted price to make sense, though, I have to believe tha…

That argument is sort of like a chess strategy that starts with "If I get four moves in a row, I can checkmate my opponent."

Nobody is denying the basic facts you've cited, so it'll be very hard for you to find someone whose ignorance of those facts you can use to your advantage. Groupon won't be as liquid as, e.g., AMZN. But buyers and sellers both know that.

And selling pressure is intrinsically short-term; Groupon's underlying value is completely independent of the number and motivation of selling shareholders. In a Bayesian sense, you could respond to insider selling--except that insiders are almost always selling, and the more successful the company is, the more they ought to sell. The biggest insider sellers are, by necessity, the founders of the biggest and most successful companies.

Re: Groupon Prices I.P.O. at $20 a Share

#14

Post by byrneseyeview »

hugh3 wrote: post #8
pbreit wrote: post #5

Of all the naysayers, the Hacker News community seemed to be one of the most consistent. I'm curious why that is? Is it because Groupon doesn't look ostensibly too technical? Is it a general disdain for commercial success? Is it for perceived arrogance? Is it a lack of business acumen?

Wow, now there's a loaded question. Why don't you just ask us whether we're gonna stop beating our wives? The reasons to be skeptical of Groupon are well documented. Not that it's a bad business, by any means, it's just that it's an industry with low barriers to entry and many competitors, and Groupon's early success is unsustainable since it was built on persuading businesses to offer ridiculously good deals which a…

I used to think it was an industry with low barriers to entry, as did lots of people who have lost lots of money on Groupon clones. I'm not sure why, but it turns out to be a really tough business for all but a few companies.

Re: Groupon Prices I.P.O. at $20 a Share

#15

Post by mhartl »

The headline only means anything because of the convention restricting IPO share prices to a fairly narrow range. The more relevant number appears in the fourth paragraph:

The stock sale values the company at $12.65 billion.

Re: Groupon Prices I.P.O. at $20 a Share

#16

Post by Macsenour »

hugh3 wrote: post #6

I don't know why the "per share" price is the headline number here -- what matters is the total valuation, which is $12.65 billion. Dunno about you, but I'm not gonna be buying at that price.

I don't argue with $12.65, it's the "billion" added at the end that makes me scratch my head.

Re: Groupon Prices I.P.O. at $20 a Share

#17

Post by jerf »

byrneseyeview wrote: post #13
jerf wrote: post #9

Putting aside the questionable nature of Groupon's IPO discussed ad nauseum here, this trick of only selling a very small part of the company in the IPO to keep price high by restricting supply seems, for lack of a better word, strange. So, I buy some stock at a price inflated by the lack of supply as the company puts 5% of itself out there. For the supply-restricted price to make sense, though, I have to believe tha…

That argument is sort of like a chess strategy that starts with "If I get four moves in a row, I can checkmate my opponent." Nobody is denying the basic facts you've cited, so it'll be very hard for you to find someone whose ignorance of those facts you can use to your advantage. Groupon won't be as liquid as, e.g., AMZN. But buyers and sellers both know that. And selling pressure is intrinsically short-term; Groupon…

I would think something more like "If my opponent is going to get four moves in a row, why should I play?" is more what I was going for. I'm not trying to screw other people over, I'm trying to figure out why I'd play this game at all.

I'm as big a believer as you're going to find in rational markets, but that entails also knowing that in point of fact they can often be quite irrational by exploiting various human irrationalities, such as using past experience when we really shouldn't. Big fund managers aren't even remotely immune to this. This strategy of selling such a small portion of the company on the market feels like a way of exploiting the fact that "everybody knows" these big tech stocks "always" explode and exploiting the demand that is higher than it should be, while in fact selling hardly anything of value at all. Arbitraging the belief that tech stocks can't help but pull a Google, basically.

Re: Groupon Prices I.P.O. at $20 a Share

#18

Post by mog_man »

hugh3 wrote: post #6

I don't know why the "per share" price is the headline number here -- what matters is the total valuation, which is $12.65 billion. Dunno about you, but I'm not gonna be buying at that price.

Analysts ranged the price at 16-18 dollars. They were highlighting the estimated premium of the IPO.

Re: Groupon Prices I.P.O. at $20 a Share

#19

Post by pbreit »

fleitz wrote: post #10
pbreit wrote: post #5

Of all the naysayers, the Hacker News community seemed to be one of the most consistent. I'm curious why that is? Is it because Groupon doesn't look ostensibly too technical? Is it a general disdain for commercial success? Is it for perceived arrogance? Is it a lack of business acumen?

The founders and early investors have all cashed out, they invent accounting metrics. When you look at the actions of their management team and combine it with weird accounting metrics, it would be more aptly named Grouponzi. It isn't a lack of business accumen, divesting yourself of a business at the height of it's market cap is the right thing to do. The problem is that in order to do sell at the highest price you…

So when is the right time for an executive to take money off the table? Ever? AirBnB founders took money off the table. Is that a bad sign for it? Founder liquidity is not rare.

Re: Groupon Prices I.P.O. at $20 a Share

#20

Post by mog_man »

Manipulation Manipulation Manipulation.

Manipulation of the worth of the services on the coupons. Manipulation of the SEC IPO filings. Manipulation of the IPO timing. Picking a mini bull run to IPO. Manipulation of the financial statements. Sacrificing user acquisition to balance the books.

A company with a sound business doesn't require this much manipulation to operate.

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