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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

#131

Post by ohashi »

zaidf wrote: post #120
ohashi wrote: post #119

Earlier quoted context omitted.

It seems like imagination is about all they are running on. I would accept the idea that growth could be more important for some companies at an early stage. However, I don't think it's applicable to groupon's situation.

However, I don't think it's applicable to groupon's situation That is debatable. Consider this: Amazon started off just selling books, today they are gunning for Walmart. At the time, people raised similar objections and Amazon took heat for years for remaining unprofitable. No one is complaining today. Similarly, I see Groupon's deals business as just one product. There are signs from their recent aquisitions that t…

Was Amazon playing the same accounting tricks? Cashing out early investors/founders pre-ipo? I see a line between ponzi and strategy, Amazon is on one side and Groupon is on another in my mind.

Re: Groupon stock sinks to new low, investors sue

#132

Post by crag »

antr wrote: post #102
ironchef wrote: post #88

Earlier quoted context omitted.

"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?

they didn't invest cash, they just exercised their green-shoe.

Exactly. They never invested cash. It's all vapor. In other words, both banks lose nothing except the promise of future profits.

Both banks already made their money (and then some) on the IPO and associated fees. Now of course, assuming the banks had no knowledge of Groupon's true financial health; they did nothing illegal.

BUT ethically, brokers/traders have a responsibility to informed their clients when it's time to cash out. A lot of people made money off this deal. And lot didn't.

But Groupon, if what I'm hearing is true, is committing fraud. I mean, my god, are they cooking the books? Sort of reminds me of Enron. But only time (and many lawsuits later) will tell.

Re: Groupon stock sinks to new low, investors sue

#133

Post by pbreit »

rprasad wrote: post #130
pbreit wrote: post #128

Earlier quoted context omitted.

That's not really what you said previously. You wrote "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" and made no mention of refunds. Further, Groupon actually does reduce revenues by the reserves held to cover refunds (hence the recent revenue reduction to account for higher than expected refunding). Further, the SEC…

My answers are contextual; the refunds weren't relevant to the other post I made. In Groupon's case, it does both: it includes money contractually owed to a third party in its revenue, and it fails to reduce revenues by the reserves to cover refunds. Simply having a reserves liability is not sufficient; under GAAP it is supposed to segregate out the portion of revenues potentially subject to refunds which Groupon doe…

> it includes money contractually owed to a third party in its revenue, and it fails to reduce revenues by the reserves to cover refunds

This is simply false. Not only does it net out reserves from revenue, it even nets them out from gross billings:

"Gross billings. This metric represents the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds. We consider this metric to be an important indicator of our growth and business performance as it is a proxy for the dollar volume of transactions through our marketplace, net of tax and reserves."

All I said was that the SEC had not begun a formal investigation, which is fact. And I stand by my contention that "fraud" is probably the wrong description.

Re: Groupon stock sinks to new low, investors sue

#134

Post by pbhjpbhj »

dclowd9901 wrote: post #19
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.

In theory, every "bargain" mechanism is doomed to failure as companies learn how to game it, returns diminish, and consumers fall out of favor with it.

How do companies game Groupon standing at the checkout taking the customers money and giving the company 20% of the invoice amount?

Re: Groupon stock sinks to new low, investors sue

#135

Post by nowarninglabel »

dia80 wrote: post #123
nowarninglabel wrote: post #84

Earlier quoted context omitted.

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%?

You can buy a Jan 13 $10 put for $2.05 so you have an upside of $7.95, just under 4:1 payoff in the event of a proper bankruptcy. That's not a lot so you can see a fair chance of disaster is already priced in. As a casual investor the option probably wins because you can sleep easier at night knowing that if GroupOn announce a cure for cancer you are only losing the $2.

Thank you, I was able to easily grok what you are saying, I was never thinking of it before in terms of 4:1 payoff, but that makes sense.

Re: Groupon stock sinks to new low, investors sue

#137

Post by JHSheridan »

zaidf wrote: post #74
JHSheridan wrote: post #68

Earlier quoted context omitted.

This argument always blows my mind. Who cares about revenue? Profit is what counts. If you make 10 trillion, but have to spend 10 trillion and 1, you're failing. Web-based companies have to make a profit too. Why do people forget this?

Saying "who cares about revenue?" is just as faulty as stating "who cares about profit?"(which I never stated).

Not following you here. Care to elaborate?

I'd invest my money in a company who makes 200,000 in revenue with 100,000 in profits much faster than one who makes 200,000,000,000,000 in revenue with 0 in profits.

To me, this seems so basic, and I'm certainly not very well versed in business. Am I missing something?

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