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Groupon stock sinks to new low, investors sue

chicagobusiness.com

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Re: Groupon stock sinks to new low, investors sue

#81

Post by knows_chicago »

guptaneil wrote: post #7

As a Silicon Valley native currently living in Chicago, I've always found it disappointing that Groupon is the poster child of innovation and entrepreneurship in Chicago. They seem to lack a solid business plan and have a history of deliberately misleading investors and businesses. Far more impressive companies, such as 37signals or GrubHub, are based here that deserve that kind of attention instead. I very much doub…

Groupon is the typical Chicago-based startup. After experiencing enough sleazy startups in the mold of Groupon, I decided I've had enough with Chicago. That type of business plan is typical of many Chicago startups.

The same investors behind Groupon are funding many other startups. They've got plenty more ponzi startups waiting in the wings.

Re: Groupon stock sinks to new low, investors sue

#82

Post by byrneseyeview »

tucson wrote: post #73
byrneseyeview wrote: post #45

Earlier quoted context omitted.

Why should they have sold for $6 billion? They're worth $9.6 billion today. Groupon is not a bet on the coupons business--that doesn't justify the current valuation. Groupon is a bet that if you can reinvent the Yellow Pages, at scale and online, you can make a ridiculous amount of money. It's probably one of the largest companies around with such a high probability of failure, but their value if they end up being th…

Assuming Google was ok for the deal they could have sold 100% of the company against cash or maybe Google stocks. Instead they sold I think only 5% during the IPO. Right now the CEO cannot sell more of his shares until May 2012 ( http://ipo.nasdaq.com/Fundamentals.asp?cikid=826818&fnid... ).

May 2012 $15.00 puts are $2.10/share, so at the current market price the insiders are still ahead. They may put a premium on diversification, but they also sold stock before the IPO.

Re: Groupon stock sinks to new low, investors sue

#83

Post by freehunter »

knows_chicago wrote: post #81
guptaneil wrote: post #7

As a Silicon Valley native currently living in Chicago, I've always found it disappointing that Groupon is the poster child of innovation and entrepreneurship in Chicago. They seem to lack a solid business plan and have a history of deliberately misleading investors and businesses. Far more impressive companies, such as 37signals or GrubHub, are based here that deserve that kind of attention instead. I very much doub…

Groupon is the typical Chicago-based startup. After experiencing enough sleazy startups in the mold of Groupon, I decided I've had enough with Chicago. That type of business plan is typical of many Chicago startups. The same investors behind Groupon are funding many other startups. They've got plenty more ponzi startups waiting in the wings.

I'm not agreeing nor disagreeing with you, since Groupon is the only startup I know from Chicago, but Chicago has this same problem with politicians. Pump-'n-Dump. 1 in 5 Illinois state politicians have seen jail time in the past 100 years.[1]

I can't honestly put anything down to words that could describe why, or if it's just coincidence. Just an odd trend.

[1]http://articles.marketwatch.com/2011-12-07/economy/30779893_...

Re: Groupon stock sinks to new low, investors sue

#84

Post by nowarninglabel »

dia80 wrote: post #38
nowarninglabel wrote: post #31

Earlier quoted context omitted.

Why not just buy puts on it?

They are extremely expensive reflecting the cost of borrowing the stock. If the weren't you could buy the stock, lend it out and then buy a put and sell call to make a 'synthetic short' and pocket a risk free profit. No free lunches.

Thank you for the follow-up, sorry if too many questions, but one more.

If I hold the general consensus opinion here that Groupon is heading to insolvency, and let's say it will be insolvent by January 2013, is it cheaper then to attempt to acquire Groupon stock to short it on margin than to buy a January 2013 put, even if your margin is running at 60%?

Re: Groupon stock sinks to new low, investors sue

#85

Post by jaxn »

MatthewPhillips wrote: post #58
Quizzy wrote: post #26

Earlier quoted context omitted.

Anecdotally, the first generation of sales rep have nothing but depressing things to say about this entire market segment now. The first year sales numbers were gangbusters, until their clients called back complaining, swearing never to do another Groupon deal, ever again. It's not just Groupon, this entire business model is unsustainable: asking a retailer to discount his products for a fee in the hopes that he will…

There's nothing ridiculous about using sales as a customer acquisition strategy. What is unsustainable about GroupOn, etc. is the requirement for extreme discounting that crushes the retailer.

Two more problems with the model:

1) Groupon taks a large cut on top of the big discount. It used to be that GroupOn wanted a 50% discount and then 50% of the revenue. This is like running a 75% off sale.

2) The customers are poorly-qualified leads. All we know is that they are local and like a good deal. That doesn't give the retailer much indication that they would be a good customer (and I think we have seen that they aren't).

Re: Groupon stock sinks to new low, investors sue

#86

Post by ironchef »

knows_chicago wrote: post #81
guptaneil wrote: post #7

As a Silicon Valley native currently living in Chicago, I've always found it disappointing that Groupon is the poster child of innovation and entrepreneurship in Chicago. They seem to lack a solid business plan and have a history of deliberately misleading investors and businesses. Far more impressive companies, such as 37signals or GrubHub, are based here that deserve that kind of attention instead. I very much doub…

Groupon is the typical Chicago-based startup. After experiencing enough sleazy startups in the mold of Groupon, I decided I've had enough with Chicago. That type of business plan is typical of many Chicago startups. The same investors behind Groupon are funding many other startups. They've got plenty more ponzi startups waiting in the wings.

Created just to post this? Wow.

Anyways...so...would you say the following are all sleazy: braintree, orbitz, threadless (aka skinnycorp), 37signals

Those are the next startups i think about when i think chicago.

Re: Groupon stock sinks to new low, investors sue

#87

Post by [deleted] »

pbreit wrote: post #12
guptaneil wrote: post #7

As a Silicon Valley native currently living in Chicago, I've always found it disappointing that Groupon is the poster child of innovation and entrepreneurship in Chicago. They seem to lack a solid business plan and have a history of deliberately misleading investors and businesses. Far more impressive companies, such as 37signals or GrubHub, are based here that deserve that kind of attention instead. I very much doub…

> I was in a barbershop a few weeks ago, where the owner told me about one of the Groupon executives who was in the shop earlier Great source!

[deleted]

Re: Groupon stock sinks to new low, investors sue

#88

Post by ironchef »

crag wrote: post #23

And this is what happens when inventors invest in a company they know noting about. This is what happens when you listen to the hype, and the street and NOT do your own due diligence. There's a reason why the big banks backed the IPO but didn't take a percentage. When it all comes down in flames, (I think it's already begun - if you haven't gotten out, get out now) the only saving grace is that the CEO and board will…

"There's a reason why the big banks backed the IPO but didn't take a percentage." Morgan stanley has 19 mil shares. Goldman has 2 mil shares. They backed the IPO and took a percentage. Am i misunderstanding your statement?

Re: Groupon stock sinks to new low, investors sue

#89

Post by rprasad »

zaidf wrote: post #40
victork2 wrote: post #3

Who would have imagined that groupon had a future? It worked on the novelty effect and it was doomed to fail. On the other hand, Chicago business is full of bugs. Ghostery block 13 (!) calls to different websites such as: Quantcast, 24/7 real media, Outbrain etc... I won't visit this website again. I wish I was warned of that before hand not when I go to the website, I value my privacy more than going there.

It worked on the novelty effect and it was doomed to fail. A little premature to write an obituary of a company that finished 2011 with 1.6B in revenue.

Part of Groupon's problem is that it did not actually book 1.6billion in revenue under generally accepted accounting principles (GAAP). It booked 1.6billion under Groupon's magical accounting practices (MAP).

Under GAAP, money which is contractually owed to a third party at the time of collection is not booked as revenue. Under Groupon's accounting practices, it is. This allows them to inflate revenue while downstating their liabilities. This is why the SEC is investigating them for fraud.

Re: Groupon stock sinks to new low, investors sue

#90

Post by radioact1ve »

tucson wrote: post #67
edw519 wrote: post #36

The first two shareholder lawsuits were filed Tuesday in federal court in Chicago after the markets closed, seeking class-action status for people who bought stock before the company restated fourth-quarter financial results on Friday. Perhaps those people should have been reading Hacker News: http://www.hnsearch.com/search#request/all&q=groupon&#38... (The first post is rather long and fairly neutral, but check out…

Thanks for the link. What I find troubling is to read so many articles pointing to shady business practices from Groupon and bubble valuation, and still the SEC lets the IPO go through and investors lose their money - that part did not happen yet but it seems written on the wall.

Could the SEC really do that? Just outright stop an IPO?
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