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The Ponzi scheme allegation isn't about the cash flow model, it's about the investment return model: Groupon used money from the late investors to pay back the
by danmaz74 15y ago
The Ponzi scheme allegation isn't about the cash flow model, it's about the investment return model: Groupon used money from the late investors to pay back the first ones with a profit, even if for now their business is losing money - and it isn't clear if they will start making real money from their business model. Or at least enough money to make the total investment worthwhile.
- pbreit 15y agoI've typically seen "ponzi" referencing Groupon's business model, not it's financing activity. Having a late stage investor payoff earlier investors/shareholders is not uncommon. IPO investors then payoff those investors and so forth. Is that what you mean?
- ForrestN 15y agoAs you stated elsewhere, the explanation for this was that it insulated them from the pressure of takeover offers. Getting offered 6 billion for a company you started 2 years ago must be an incredibly difficult thing to turn down, so taking some equity out allows you to make decisions that you think are best for the business without worrying so much about your personal risk profile and so on.
- danmaz74 15y agoYes, that's what I mean. Ponzi schemes are about investors - who expect to earn money from their investment - not about consumers. In the end, if after the IPO the business starts making money and that money gives a healthy return to the latest investors, everything is fine. If, on the other had, it turns out that the business model can't give a return on the investment and the latest investors lose their money, which was used to pay off the first investors, the mechanic of a Ponzi scheme is perfectly respected :)