Monday, June 6, 2011

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?

If I owned Groupon, I would have sold to Google. They are a sophisticated buyer who could never argue that they had been misled. If you IPO a company that is a dog you will end up getting hounded by lawsuits.


Allan Folz said...

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.

CP said...

That is probably a good theory.

Joe Nelson said...


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.


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.

CP said...

Groupon is probably even worse than LinkedIn.

"What is wrong with people," as I always say.