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Groupon Still Delivering Big Group Losses As I Warned Since Before The IPO

Reggie Middleton's picture




 

 

Every now and then, there's a company that I simply find as having an unsustainable business model. It's not so much an issue of not respecting the company, it's just that the business (as it is currently operating) cannot be seen as an ongoing concern. The Street.com reportsGroupon Plunges on Revised Results

Groupon shares plunged in extended trading on Friday after revising its reported fourth-quarter and full-year results, its first as a public company. The daily deals site reduced its fourth-quarter revenue by $14.3 million after initially reporting sales of $506.5 million. The revision also resulted in an increase to fourth-quarter operating expenses that reduced the company's operating income by $30 million, net income by $22.6 million and earnings by 4 cents a share. Groupon blamed the change on a shift in the company's fourth-quarter deal mix and higher price offers, which have higher refund rates. Investors baulked at the revision, pushing Groupon's shares down $1.68, or 9.14%, $16.70 in extended trading.

 Groupon_Crash

 Of course paying subscribers, and even casual blog readers, cannot say that I didn't thoroughly warn you! Early shorts on this stock as per our research notes valuation matrices would have given pleasant Christmas presents and would have also stuffed one hell of an Easter basket as well!!!

On that note, let's reminisce....

  1. Thursday, 16 June 2011 What Does Groupon and The Matrix Have in Common?
  2. Monday, 26 September 2011 I Suggest Groupon Offer Coupons To It's IPO Investors, They're Going To Need Them
  3. Monday, 26 September 2011 What's The Best Way To Profit From Groupon's IPO?
  4. Sunday, 13 November 2011 I Hope You Groupon IPO Investors Got Coupons At The IPO!!! Yeah, That's Right I Was The First To Say It

It's 2011(2), Groupon, LinkedIn, Facebook, Banks, Brokers & REITs are all partying like its 1999! Subscribers, feel free to download icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36)

Groupon_Valuation_Page_03

CNBC's Herb Greenberg brought this article to my attention: The checkered past of Groupon's chairman

FORTUNE -- "Lets start having fun... lets get funky... let's announce everything... let's be WILDLY positive in our forecasts... lets take this thing to the extreme... if we get wacked [sic] on the ride down-who gives a shit... THE TIME TO GET RADICAL IS NOW... WE HAVE NOTHING TO LOSE..."

Eric Lefkofsky

Eric Lefkofsky, serial entrepreneur

This is a quote from the dot-com era. It's pretty much what you'd expect a novice executive to say back then, when it was all about money and not at all about creating something good. It was written in an email by the co-founder of a company called Starbelly.com, which labeled itself a B2B provider -- back when people greeted that phrase with a straight face.

In early 2000, Starbelly sold itself to another company called Ha-Lo Industries for $240 million, much of which went to the author of those words, a man named Eric Lefkofsky. Not long after that transaction, Ha-Lo declared bankruptcy. Shareholders and others blamed the Starbelly deal, and a series of lawsuits ensued.

Eric Lefkofsky is the co-founder and chairman of Groupon, which filed last week for an IPO valuing the company at $30 billion, as well as its largest shareholder, with a pre-IPO 22% stake in the company.

 

Archived articles of interest...

  1. A Realistic Forensic Valuation of LinkedIn – There Ain’t No Surprises Here…
  2. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
  3. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
 

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Mon, 04/02/2012 - 12:54 | 2309947 Salah
Salah's picture

Reggie, for all your empirical data (great) on GroupOn, as well as all your work on commercial real estate...there's still a "hidden" side to this.  The astrolgers who work for some billionaires I know, say it's a matter of the 'great inflator' Neptune  recently leaving Aquarius, the sign of "all things social, group related, network related, electronics & computer related", etc and the coming collapse of that bubble.   Does it all just disappear completely?  No, but it gets subsumed back into the milieu of the economy with std multiples and 'normal' valuations.   Ditto, for all things real estate (not finished here---at all!) with toxic Pluto's recent entrance into its ruling sign Capricorn, but much slower and more intense, also affecting the political realm (read: Europe) as well.

Mon, 04/02/2012 - 12:51 | 2309935 Common_Cents22
Common_Cents22's picture

It's crazy that GRPN cannot be a legit biz.   They are peddling digital deals and taking a cut.  No brick and mortar, no inventory.   Just a sales team.    What the heck are they doing?   Totally inept management.

Tue, 04/03/2012 - 19:16 | 2314949 piceridu
piceridu's picture

One word: Priceline

Mon, 04/02/2012 - 13:05 | 2309965 WilliamShatner
WilliamShatner's picture

Partly true, but they do have a lot of highly paid IT & data scientists working for them.  I'm in the tech business and know a thing or two about companies like Groupon.

What befuddles me is their need for an office with sales people in Palo Alto, one of the most expensive pieces of real estate in Silicon Valley.  It's very nice, I've been to it. 

Why they don't have all sales run out of some place cheaper just says one thing, they are more concerned about image and clout than they are about being profitable.

This recent earnings revision, and it's not the first, also says they don't care about being honest with the investors.

My opinion, I could be wrong but I've been around the block enough to know something sketchy when I see it.

Mon, 04/02/2012 - 13:25 | 2310016 dynomutt
dynomutt's picture

+1

I've possibly observed the sort of bullshit that you describe in action, but on a different coast.  I think this comic probably sums it up:

 

http://xkcd.com/1032/

 

Remember, they're probably trying to impress THOSE people.

Mon, 04/02/2012 - 13:50 | 2310093 WilliamShatner
WilliamShatner's picture

Try this one, a blast from the .com past (but still very relevant today):

http://www.thevc.com/strips/Upside10.html

Mon, 04/02/2012 - 13:22 | 2310005 Common_Cents22
Common_Cents22's picture

Yep, like I said, piss poor management.

Mon, 04/02/2012 - 12:51 | 2309934 Lost My Shorts
Lost My Shorts's picture

Thanks a freakin' bunch for the insights.  But I tried to short it last week and my broker said no shares to borrow.

Mon, 04/02/2012 - 12:36 | 2309884 Seasmoke
Seasmoke's picture

reggie, you could have saved all that time on research, reports and charts and just have went to Groupons website twice to understand it is a total fraud

Mon, 04/02/2012 - 12:03 | 2309783 847328_3527
847328_3527's picture

Was the original name was 'ClusterPunk" but later changed to....

Mon, 04/02/2012 - 11:54 | 2309758 Zero Govt
Zero Govt's picture

Nice number crunching Reggie

Mon, 04/02/2012 - 11:31 | 2309700 Centauri
Centauri's picture

I guess Reg is still working on the APPL mea culpa...

Mon, 04/02/2012 - 11:01 | 2309618 williambanzai7
williambanzai7's picture

FRAUDOMETER

Mon, 04/02/2012 - 12:04 | 2309788 malikai
malikai's picture

Golden Turdball!

Mon, 04/02/2012 - 12:46 | 2309915 williambanzai7
williambanzai7's picture

Indeed

Mon, 04/02/2012 - 11:30 | 2309699 bank guy in Brussels
bank guy in Brussels's picture

Just seeing Reggie's article title, before I clicked to look, the first thing that came to my mind was William Banzai's art on the Grouponzi.

There must be some fellow residents of Mr Banzai in Hong Kong, who are making big money, as well as having an enormous laugh, over Western world financial market insanity in these times.

Mon, 04/02/2012 - 12:25 | 2309847 Problem Is
Problem Is's picture

+1... Grouponzi says it all... Douche bag CEO needs Madoff time...

Nice, accurate post Reggie...

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