What Is Wrong With People #1200: Groupon
Credit Bubble Stocks is nearing its 1200th post, although that metric includes drafts that have not been published yet. I cannot believe there are people who would buy into a Groupon IPO! Has the whole world gone crazy?
- Groupon reports a metric called Adjusted consolidated segment operating income, or adjusted CSOI, which excludes “online marketing expense, acquisition-related costs and stock-based compensation expense.” Eric Savitz notes that this smells like 1998-era dotcom bubble accounting.
- Yipit argues that Groupon's "declining revenue per user, increasing customer acquisition cost, and declining operating margins do not bode well for the company’s core business."
- Tech investor Marc Andreessen doesn't think there is a tech bubble. I am not impressed with this guy.
- Who cashed out in the recent Groupon venture financing rounds. Quite a bit of money taken off the table.
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4 comments:
FWIW, I read somewhere, can't remember where, that the outrageous price GroupOn was asking from Google owed to the likelihood DoJ would nix it for anti-trust reasons. The high price was an effort to ensure a high break-up fee.
Whether that's entirely true or not, I suspect some similar ulterior, game-theoretical reason. Perhaps Google was even in on it and knew the offer was going to be denied. Perhaps it is all about creating buzz for Groupon's and other dot-com's IPO's. I'm sure Google execs have their fingers in a few pre-IPO cookie jars they'd like to cash-in on.
That is probably a good theory.
CP,
I was waiting for your take on the Groupon IPO. Great links. I didn't catch the one about who was taking money off the table prior to the IPO in my own readings. The deal even seems worse to me now than it did before.
You have to love the audacity to say something like "if you remove our marketing costs we have profitability of $X" with a straight face. As if marketing and building a strong brand and franchise were some unimportant task for a firm operating in a market with virtually no barriers to entry.
Plus Google basically announced they were planning to spend at least $6B to get into this market with their attempt to buy Groupon and they aren't the only ones with deep pockets looking to position themselves in this space. I thought Groupon was insane for turning down Google's $6B. The only people crazier might be the subscribers to this IPO.
@portland_allan,
To the comment about the DoJ - I also remember reading somewhere that Groupon had something like 400+ direct competitors in their market. We would expect that when a business has incredibly low barriers to entry. It would be crazy for the DoJ to attack Google for something like acquiring Groupon with the history we have now on internet businesses but they've shown themselves to display arbitrary abuses of power before so I suppose the suspicion isn't unwarranted.
Groupon is probably even worse than LinkedIn.
"What is wrong with people," as I always say.
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