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Groupon Not Doing So Well On Wall Street
bdking writes "Shares of the daily-deals site were up Tuesday, but Groupon's ride on Wall Street since going public in early November has been almost all downhill. And there's no evident catalyst to reverse the slide."
From the looks of it, Groupon is blowing all of its money attempting to expand in the face of ever-growing competition in a market with trivial start-up costs.
It's simple: They IPO'd. They don't give a shit about their stock price; they have your money. An IPO is always a bad buy-in because they'll do everything in the world to inflate their stock price. The IPO brings cash to the business; then us traders trade little sheets of paper back and forth for some imaginary value, hoping that we can figure out when the value is going to stop going up and then distribute our papers to other idiots, then buy them back when the value is going to stop going down. In this way we get other paper (called money) in greater quantities than the little papers (called stock) that we're trading around.
Facebook will do this too. They'll IPO, you'll hear singing praises about how this is THE IPO you want to get on--it's friggin' Facebook. You'll see their stock price go up for a day or two after. Then down it comes. LNKD did the same thing.
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If 50,000 people each agree to buy 10 shares of AAPL, Apple will give them the stock for 20 percent off and then give half the proceeds to Groupon?
Nah, I don't think they'd go for that.
Can we just go ahead and take that 6 billion you offered earlier and call it squaresies?
Share price is a function of revenues. Cash flow and profitability determine stock price.
Companies that do little to generate cash and profits don't deserve a high share price. Did the dot com boom teach us nothing?
They're starting to realize that Groupon customers don't translate into long-term customers, which makes the value of offering deals on Groupon very low.
50% off, limited time only!
blindly antisocialist = antisocial
they only floated 5% of the company shares. principals all had a nice ejection seat. the stock price goes up on the first day because everyone wanted to borrow it so they could short it. the IPO underwriters make a fee on the offering, the principals cash out, some early bird flippers turn a profit on people looking to supply the borrow or cover their shorts, and they exit too. who's left? the market bagholders who get excited about 'new technology booms' from watching CNBC over their orange juice. it's basically a ponzi scheme. I hope they drown in it.
Speak for yourself.
of some 60 year old clueless investors with money to burn but not much web savvy, some 30 year old wall street sharks eager to pump a price and cash in on their cluelessness, and a bunch of 20 year olds rolling their eyes and going to pick up their cheap cupcakes?
because the story can't possibly be "promising tech company not so promising". so nobody learned anything from the dotcom crash 10 years ago? is it 2001 or 2011?
this story arc is completely and utterly predictable. clearly i'm not some wall street genius: i'm certain most people posting on this site saw this whole story arc coming too
so why the bleep is it still happening?!
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Groupon is dumping VC money directly to the founder's pockets and screwing the businesses that participate. That combination will result in failure.
How does groupon work?
Company A has a product that normally sells for X. They get a deal with groupon to sell it for Y, such that Y < X.
Groupon take some cut, so the retailer is getting A, such that A<Y<X.
So I call the retailer and go 'hey, let me buy your thing at price B', such that: A<B<Y<X.
The retailer gets more than they would from groupon. I pay less than I would if I'd gone through groupon. Groupon get zilch. I win, the retailer wins. My only issue is how I pitch the price B. But for me, anything below Y is a win for both of us, I just don't know what A is (if I go below that, the retailer is better off with groupon).
Or I've missed something, apart from the fact that if groupon didnt exist I wouldn't have heard about the retailer in the first place...
it's basically a ponzi scheme.
Nope, not even close.
The situation is analogous to "begs the question". "begs the question" has a technical very specific philosophical meaning but in modern prose it almost exclusively means "Insert wordy semi-scholastic filler phrase here". Also see "price point" instead of "price", etc etc. Hell, see "etc" too.
In modern American speech, "ponzi scheme" is a semi-scholastic phrase meaning "it sucks" or "I don't like it" or "they're crooks". It does have a real technical meaning and describes a criminal activity which has nothing at all to do with your explanation in any form. Ironically (irony is another often re-imagined word) their sales/finance strategy is vaguely ponzi like, in the sense that all corporate sales/finance strategies are when they reinvest any profits in the company, but not really, not in a criminal sense anyway, and certainly not in the market explanation you provided.
I can't think of a way to run a ponzi in/over/with a market like you describe... maybe a boiler room operation cooperating with false price quotes could pull it off?
Note that I'm not defending them; they appear based on lots of journalist stories to have published fraudulent financial data. That would make them frauds, not ponzi operators. I'm just saying it does no one on either side, any good, to describe a bank robber as a kidnapper, or describe a horse thief as a murderer.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
no. it means you pay out the early suckers with new suckers money. that is the definition of a ponzi scheme. when you run out of new suckers the whole thing breaks down.
Speak for yourself.
They have admitted in their filings that they are using the float from both the income from new sales, as well as the hold-backs on the money they owe merchants (they can take 3 to 4 months to pay out) to support their business.
They don't have any profits once they pay their sales reps and the merchants they owe money to - they've also failed to put aside the money from unused groupons - most consumers don't know that in many states they can claim a refund from groupon up to 5 years later for unused tickets.
First attorney-general who goes after them sinks them.
yes, I do agree on that last point. I still see similarities of the IPO with madoff and ponzi's deal though since you as the original seller know there is no value to the company, really because the business model is dead in the water (For lots of reasons.) So the only way it is any good to anyone on the stock market is if the price is above zero, and for each guy selling it, it gets a little closer to zero every day, without possibility of going up because the model doesn't support a higher price nor dividends. There is nothing on the horizon for them that can pump up the price short of people (new suckers) thinking they'll get to flip it to someone else. This is very much like a ponzi scheme. perhaps the fault doesn't lie entirely in the company, but also with everyone else who made an IPO on a sham operation possible.
Speak for yourself.
I stopped reading at your last comment because the fixed width font hurts my eyes.
Slashdot just uses whatever monospace font you have configured - it's not his fault you have Courier New.
In Firefox you can configure that in the Content tab in the preferences. I use Inconsolata and I find his post very readable.
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Facebook is the next company in trouble. Their Alexa reach peaked six months ago, before Google+ launched. That means Facebook is no longer a growth company, and they have to be valued strictly on profits, less their future potential for decline. They didn't IPO on the way up. Now it's too late for an inflated valuation.
Facebook's real financial figures aren't known. They haven't had to make the reports to the SEC that a public company has to make. Groupon (and AOL before them) inflated their profits by capitalizing and depreciating things they should have expensed. (AOL tried to account for those free AOL disks as capital expenses. That got them in trouble when it was noticed.)
On top of that, social networks have a limited life. AOL was once the leading social network. Remember Geocities? Orkut? Friendster? Yahoo 360? Myspace? Once the downward slide of a social network starts, it doesn't seem to stop.
Social networks also have a fundamental problem with advertising - it's an annoyance. Relevant ads that appear with search results are both useful for users and profitable for advertisers. Ads on social networks, where you go to connect with your friends, just get in the way. Social networks try to compensate for this by adding more and more ads. That killed Myspace, and Facebook seems to be on track to go the same way.
But Facebook has to IPO. They have to pay off the early-stage investors. This isn't going to be pretty.