Maybe they can turn this around by offering their stock for 50% off normal ticker prices. Then surely people, having bought it once and discovered how awesome it is, will come back again and again to pay full price.
That won't work because they'll just attract the worst kind of cheapskate investor demographic, who'll move on to the next penny stock once the discount is expired.
It would probably be best for the whole segment if it got cancelled entirely. There are way too many questions about the long term viability of groupon to feel good about an IPO, as well as a possible SEC probe.
The investors/founders who took so much off the table, in their previous rounds, should put most of it back in, if they're so confident.
For example, Mason cashed out about $28 million, and Lefkowsky about $382 million. Reinvesting most of that would speak louder than another 'quirky' bit of made-to-leak copywriting.
But they are not confident. Which is why they took money off the table. In hindsight Mason is probably kicking himself for not taking more out. Leftkowsky seems to be all set though.
$382MM? Why did the investors consent to that? That's a lot more than is needed to stop worrying about the founders selling the company to keep paying their bills.
Indeed, and he makes Mason's comparatively small sales look better in comparison. I don't begrudge a founder taking some profits early: for a job well done so far, and to offset the natural conservative loss-aversion that might otherwise dominate their decisionmaking, to the detriment of all investors.
But with Lefkofsky, it appears the more experienced and sophisticated investor who also needed the money least took the most money off the table. Hard to see that as anything other than serious insider doubt about the company's prospects.
How long can groupon survive without more funding? The way their financials sounded, I doubt they could even carry on as they are currently through the end of the year. That's a lot of pressure in an economy that could be back on the ropes.
Seems like their core business is pretty counter-cyclical. If the economy goes down, it'll be harder to raise funding, but more people will want coupons and more businesses will be desperate for any short-term revenue.
From the submitted article: "Its IPO filing in June revealed a company growing quickly, but losing a lot of money." It's tough on a company's future to lose money so consistently, so, yes, it's likely Groupon will not survive.
If they don't IPO, how long until they run out of cash on their current trajectory? I seem to remember the runway was surprisingly short (something like this or next quarter), in part because of using fundraising to give cash to early investors and insiders.
out of their last "uh like a billion" dollar round $810M went back out the door, they only kept $136M for operating expenses and I believe they're at about about a $100M a quarter run rate.
So you have to believe the answer is soon. Those G round investors are getting extremely squeezed they need either an IPO or they are faced with having to put another round in to get some additional short term runway. I doubt at this point they're going to have a lot of people lining up to put new money in (or if they do the terms will be pretty generous).
There is still a way out if a Google or maybe an Amazon wanted to take a shot at a bid right now. Groupon for $4 billion Anyone? Anyone?
I though that they were going to successfully IPO around the previous valuations.
It's just been a supremely turbulent/volatile this summer and eyes have shifted to Tech IPOs commonly during downslopes. People have been considering if Tech IPOs are over-valued - not forgetting what happened just a couple years ago.
My blog on the credibility of Groupon's IPO Valuation maybe wasn't so spot on. Granted, I voiced my thoughts on the IPO's validity much before the coaster ride investors have been on this summer. Blog from (6/18/11): http://jacobirw.wordpress.com/2011/06/18/groupon-pre-ipo-val...
Despite the consensus on Groupon's overall unworthiness at this time, with new management (or a pivot under current) the Groupon IPO could be right back in the positive light of investors and the tech community alike. It must be remembered that they are now a resource for thousands upon thousands of business owners that have filled Groupon's pockets with over a billion in cash.*
Revenue is also cash - before expenses [they are collecting this amount]. I'm not suggesting that Groupon's 'operations activities' aren't responsible for pulling/keeping them in the red.
However, investors like Warren Buffet look for high-earning and unprofitable companies quite frequently to get involved with - companies like Groupon. Reason being, with some direction by a strong [/new] board of directors (majority shareholders; highly-successful business leaders; wiki: 'See's Candies', 'Washington Post', 'Berkshire Hathaway'), a company can re-divert [i.e. 'pivot'] resources, slash out unprofitbale segments, etc., and successfully revive a titan.
Response note: I garnered my figure of $1.6 billion based on a Dartmouth article here: http://www.tuck.dartmouth.edu/cds-uploads/case-studies/pdf/G... -- see bottom of page two, second-to-last paragraph in the section titled, "The Fastest-Growing Business in History."
That mentions revenues only, and you can't use that to translate directly to cash, they're not the same thing, you can't use those terms interchangeably.
If a company has 100K in revenues and 50K in expenses per month after one month they'll have 50K in cash, to give a very limited example.
So you have to take the revenues and reduce them by the burn rate to get an idea of how big groupons war chest really is.
According to groupons own filings they've got 208 million in the bank so they've spent a good 1.4 billion of that money they took in.
Of course 200+ million is still not exactly pocket change.
I don't quite follow the Warren Buffet link, his only comment on groupon as far as I know is that he said he'd read their IPO filing papers but that was about it.
"Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold." - Investopedia
You may be thinking of 'marginal revenue' perhaps. I am talking to both of you.
Tell me to read an accounting book - sure, if I have time after I am done buying a basket of financial sector out-of-the-money put options for the boutique hedge fund I manage this morning, I will be sure to do that. So yeah - while, I am brushing off my old 101 book, maybe you can try not to make yourself sound foolish in front of audience next time.
I'm very happy that you can buy baskets of financial sector out-of-money put options for boutique hedge funds and still find time to use Google.
However, you are still wrong. In accounting, revenues are not the same as cash. A revenue event may be committed to the books well in advance of cash changing hands, and indeed the first step for most revenue is to be entered into accounts receivable.
What we are discussing here the difference between cashflow and revenue, which is a critical question for investors because of the way Groupon is choosing to run its books.
If you would be so kind as to tell me the fund you work for, I would be grateful. It is my intention never to invest in such a firm.
We only invest for clients in the net worth range of $100k+.
Just go back and read the entire first sentence that you continue to quote: "Revenue is also cash - before expenses [they are collecting this amount]. I'm not suggesting that Groupon's 'operations activities' aren't responsible for pulling/keeping them in the red."
... clearly not a Merriam-Webster quote - rather my own; to describe a simple concept: Groupon makes money (see definitions: USD; cash) - potentially, these resources could be spent more efficiently.
In regards to Mark-to-Market Accounting, an simple example could be for when a journal entry is made in/debit to 'Accounts Receivable' - you're right, this has not effect on the cash balance.
So your point is valid, but contradictory. Because amounts under ‘Accounts Receivables’ are not considered revenues – assets (maybe, but still not exactly) - but certainly they cannot be called revenues. As receivables are earned, they are transferred to 'Cash,' under assets and now it’s both a revenue and cash.
Also, companies rarely sit on receivables. Instead, they factor them (or borrow against them) and "Voilà!"... cash!
The majority of business owners believe they can invest these amounts and make a higher return than they are being charged in interest.
That all being said, I think your point there isn't very strong.
The two objections I've seen to Groupon's accounting practices are:
* They had that weird metric which miraculously showed them being wildly profitable, and
* They have a long lag time for collecting actual cash, but still book the groupon cut as revenue in a given period.
The reason people get anxious about the second point is because revenue isn't cashflow. Groupon has amazing revenues on its books, but cash-wise it seems to play things close to the line.
It's a problem because it makes Groupon highly unpredictable. If a significant fraction of groupons begin to fail (and at any point in time the majority of Groupon's groupons have not been present cashflow) then Groupon is stuffed. And with only 3 years of operations, all of them exceptional and not steady-state in nature, it's hard to say what will happen.
You say "Revenue is also cash - before expenses". That's still not correct. Revenue can be booked before cash, cash be taken that isn't revenue. Sometimes cash comes in advance. The key point is: Groupon can book revenues that aren't backed by cash, and they have done so aggressively. And given their apparently high costs and relatively small cash reserves, it's basically a smoke-and-mirrors act.
They could borrow against their A/R, but it wouldn't be cheap given the factors outlined above. Whether they succeed or not still relies totally on a low bad-debts rate, regardless of what they can borrow.
They we're right to hold off on this IPO given the market volatility. Wall st (professional traders) loves to wait for the inevitable initial run up (by initial professional investors and retail clients), to sell it quickly after the initial surge. There is just way too much question on their actual current and future value. I wouldn't be surprised if this IPO never happens.
probably a good idea for groupon. though i enjoy bagging on Groupon's highly unconventional approach to wall street bankers in preparation for its IPO, seven years ago Google was in the same position [1]. Google exhibited hubris and showed no clear purpose for the proposed raised equity, ultimately IPOing shortly after the peak of its 'hotness'. That is not to suggest that Google's business is comparable to Groupon's, but that anything could happen. Google may have not IPO'd like a pro, but they are one of the largest shakers in the tech industry today.
The research I'm following [1] (and probably over simplifying here) indicates that the double dip in the stockmarkets will really kick off this month (Sept 2011) for at least 6 months.
Maybe Groupon thought they could sneak in ahead of that; maybe they thought the economy wouldn't double dip; maybe they thought there was enough positive momentum in the idea of Groupon that external factors wouldn't matter.
But the scary thing is that if they've heavily cut back on marketing AND they're low on cash as other reports have indicated, then they won't be able to postpone the IPO through until March 2012. They may be forced to list as the market tumbles or, best case scenario, at the bottom of the next bull run. Not ideal timing unless your definition of ideal involves "buy high, sell low".
[1] See all the economic articles by Darren Shirlaw here http://www.shirlawsonline.com/editorials .
(Disclaimer: I'm completely biased because the companies I own are licensed through the company Darren founded, so part of everything I bill goes to his research and development team (and I've been part of that team for specific projects, including currently reviewing his articles and predictions from the past 4 years for a short book on navigating through it all).)
... I think it's much more likely they didn't foresee the negative reaction that their IPO filing created. The buzz is bad, therefore they will try and refocus and won't do an IPO right now.
Meanwhile, Guidewire, a company that actually makes money, contributes to the technical world (Gosu (http://gosu-lang.org), The Aardvark Build Tool (http://vark.github.com/), etc.), that made the front page of TechCrunch because it has an upcoming IPO:
Well, I've called Warren Buffett a thief and a liar, and called separation of markup and code a sham, so I figured I'd complete the hacker news karma holocaust trifecta.
