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Battle In The Boardroom: Why Groupon Probably Paid Off Its Early Employees

• dpapathanasiou 15y ago
  What I'd really like to know is what the G round investors were thinking: did they not expect Groupon to use that round to pay off early investors and employees, or was that part of the plan?
  • dshipper 15y ago
    I'm assuming that they knew that Groupon would use the money to keep its original employees around for another year, pump revenue. The payoff at the end for the investors and the employees is a huge IPO.
    • dpapathanasiou 15y ago
      "The payoff at the end for the investors and the employees is a huge IPO." That can be true for investors, but employees typically have to wait years to be able to cash out their shares. If Groupon in the long term is the bomb the S1 indicates, an IPO is not a great deal for employees (unless they already got theirs in the G round, of course).
      • brosephius 15y ago
        why do you say years? wouldn't all the earliest employees be partially vested right now, and vesting more each month? and as long as the share price stays bubbly through the end of the lockup period they can cash out at/close to the top.
        • dpapathanasiou 15y ago
          Every deal is different, but it's not unusual for vesting to take four years.
          • ojbyrne 15y ago
            But it would be unusual for none of it to vest for four years. Typically a four year vesting means a 1 year cliff where nothing vests, at the end of which 25% vests. Then the rest vests at a rate of 1/36 each month.
  • jordanb 15y ago
    The G round investors are buying their way into the IPO. They believe that the IPO will be huge regardless of Groupon's health, and there's a lot of money to be made on it, so they're purchasing -- from the early investors -- access to pre-IPO stock.
    • dpapathanasiou 15y ago
      Ok, so they were in on the plan as @dhh's article suggests, but why did they put up so much (nearly a billion)? That level only makes it harder for them to realize a high return.
      • adw 15y ago
        30%-50% on $1bn is a really high return. The bigger the stakes, the lower the multiples. (That's why people use leverage.)
        • dpapathanasiou 15y ago
          That's true, but leverage works both ways: if the IPO flops, it's a huge hole in their portfolios. It'll be interesting to see what effect all this public criticism of the S1 filing does to the opening day price.
          • PedroCandeias 15y ago
            I'm guessing this public criticism is pretty much limited to tech savvy audiences so far. I haven't seen Groupon get this criticized on cnn, money.com or ft yet, so the wider public is probably still thinking this is a great deal.
    • haberman 15y ago
      If that's true, it lends more weight to the charge that the whole thing is a Ponzi scheme (later investors paying off early investors).
      • 15y ago
• hullo 15y ago
  Drilling into his specifics, one issue is that they didn't actually keep the team together (and may well not have wanted to, given the comp package the new COO at least got), the COO and CTO both left in March. http://money.cnn.com/2011/06/03/technology/groupon_ipo_quirks/index.htm http://money.cnn.com/2011/06/03/technology/groupon_ipo_quirk...
  • dshipper 15y ago
    Groupon raised the 1 billion in January which means that both the COO and CTO stayed long enough to cash in on the Series G round and then left.
    • thisisnotmyname 15y ago
      Does that indicate that they thought the company's value was peaking? More importantly, are we actually at the point where blogs in which a guy is admittedly just making things up about Groupon makes it to the front page?