Groupon Prices I.P.O. at $20 a Share • Hacker News Board

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

#21

Post by Woost » Fri, Nov 04, 2011, 1:24 AM UTC

byrneseyeview wrote: post #14

hugh3 wrote: post #8

Earlier quoted context omitted.

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.

Groupon's business is basically all sales and marketing. The v1 tech behind the deal-a-day offerings is trivial. (leaving aside recommendations and such)

You need to be very good at signing up businesses and getting good terms for your company to succeed. In addition, you need to figure out how to get a stable base of customers of your site.

Basically, Groupon clones have very low technical barriers to entry, but if you don't have a really good sales and marketing staff you're in trouble.

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

#22

Post by kylec » Fri, Nov 04, 2011, 1:37 AM UTC

Macsenour wrote: post #16

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.

Honestly, $12.65 might be too much too - the company has built up some pretty serious liabilities the way the deal payouts are structured.

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

#23

Post by chefsurfing » Fri, Nov 04, 2011, 2:10 AM UTC

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?

I think it has to do with a perception that Groupon does not create as much of the value they take credit for.

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

#24

Post by pbreit » Fri, Nov 04, 2011, 7:38 AM UTC

byrneseyeview wrote: post #14

hugh3 wrote: post #8

Earlier quoted context omitted.

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.

It has natural monopoly-like characteristics: buyers go where the best deals are, sellers go where the most buyers are.

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

#25

Post by pbreit » Fri, Nov 04, 2011, 7:41 AM UTC

gojomo wrote: post #7

I predict that much like Demand Media [DMD], Groupon [GRPN] will be at less than half its IPO price within one year.

There's at leat one major difference in my mind: I and many people I know use and like Groupon (both consumers and merchants). No one I know, including me, use or like Demand Media.

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

#26

Post by pbreit » Fri, Nov 04, 2011, 7:48 AM UTC

tadfisher wrote: post #11

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…

Neither point makes much sense. No matter when payouts are made, Groupon keeps around 40% (an extraordinarily lucrative business). I'm not exactly sure what you're getting at regarding conversion rates. From a merchant perspective Groupon offers the unheard of conversion rate of 100%. Every single prospect generates a sale and the vast majority walk through the door.

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

#27

Post by benackles » Fri, Nov 04, 2011, 8:43 AM UTC

The comments are much more interesting than the news. 100% negative public sentiment on the most inflated IPO of the year. That can't be a good sign.

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

#28

Post by fleitz » Fri, Nov 04, 2011, 3:50 PM UTC

pbreit wrote: post #19

fleitz wrote: post #10

Earlier quoted context omitted.

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.

When it suits them, it doesn't matter to me, I could care less if an executive can convince someone to take their stock off of them.

Taking 'like a billion dollars' in liquidity when your company is bleeding cash does not engender me to believing that the management team sees long term viability in the company.

Groupon is built to flip, if you're a trader a stock like groupon is perfect, there will be lots of volatility to trade on. I'm not a trader, I believe in creating long term value. Groupon might be the kind of thing where a guy like Buffett could take advantage of the cash flows it generates to build a bigger better Berkshire.

http://www.youtube.com/watch?v=5ydqjqZ_3oc

This is fundamentally the best explanation of the groupon business model.

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

#29

Post by joezydeco » Fri, Nov 04, 2011, 4:45 PM UTC

chefsurfing wrote: post #23

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?

I think it has to do with a perception that Groupon does not create as much of the value they take credit for.

In Chicago, there's an additional resentment that the business community considers Groupon the first successful web startup in the city to ever go public.