8 ms·

Groupon IPO on hold

97 points by zwieback 15y ago

lambtron 15y ago
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. [1] http://www.washingtonpost.com/ac2/wp-dyn/A14939-2004Aug19?language=printer http://www.washingtonpost.com/ac2/wp-dyn/A14939-2004Aug19?la...
JacobAldridge 15y ago
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 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).)
- jonknee 15y ago
  ... 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.
0x12 15y ago
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. see also: http://www.businessinsider.com/groupon-cancels-ipo-2011-9 http://www.businessinsider.com/groupon-cancels-ipo-2011-9
ajcronk 15y ago
A theory: Groupon leaked the memo so that it would be forced to pull the IPO, similar to Wired in 1996.
- dpapathanasiou 15y ago
  And leave the G round investors, who put in $950 million in January (http://www.businesswire.com/news/home/20110110006746/en/CORRECTING-REPLACING-Groupon-Raises-Billion-Dollars http://www.businesswire.com/news/home/20110110006746/en/CORR...), holding the bag? It doesn't seem like something they'd do deliberately.
  - ajcronk 15y ago
    Yes, that makes it interesting. Which is better for previous investors: IPO bomb or another private market raise?
    - dpapathanasiou 15y ago
      Can they go back and raise another private round? Who would buy in, with IPO off?
sudonim 15y ago
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.
- mikeryan 15y ago
  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?
  - eric-hu 15y ago
    To get Google's attention, they just need to patent the idea of a 50% off coupon.
  - felipemnoa 15y ago
    >>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? As if. That ship is going down fast and hard.
- VladRussian 15y ago
  "shotgun IPO"
JacobIrwin 15y ago
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-valuation-speculation/ 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.* *Estimated 1.6 billion in 2011 fiscal year.
- 0x12 15y ago
  >that have filled Groupon's pockets with over a billion in cash. Having 'cash on hand' is great but it seems that groupon owes more than they have by a considerable margin: http://finance.yahoo.com/news/Groupon-is-Effectively-minyanville-3764150861.html?asset&ccode&pos=3&sec=topStories&x=0 http://finance.yahoo.com/news/Groupon-is-Effectively-minyanv... Also that article says they have 208 million in cash, not nearly the 1.6 billion that you mention.
  - JacobIrwin 15y ago
    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/Groupon_Case_R2.pdf 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."
wpietri 15y ago
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.
- dpapathanasiou 15y ago
  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.
  - rjbond3rd 15y ago
    > worst kind of cheapskate Exactly (the OP was being sarcastic :)
    - create_account 15y ago
      I think he gets it. He's being sarcastic, too.
  - m0wfo 15y ago
    http://en.wikipedia.org/wiki/Sardonicism http://en.wikipedia.org/wiki/Sardonicism
    - create_account 15y ago
      http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29 http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29
- minikomi 15y ago
  Cue flash of someone pitching "A daily deal site for investors"
- mkramlich 15y ago
  Plus they could book any such stock purchases as revenue. Profit problem solved! I love creative accounting.
trotsky 15y ago
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.
- deleted 15y ago
  [deleted]
- ForrestN 15y ago
  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.
- tokenadult 15y ago
  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.
gojomo 15y ago
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.
- felipemnoa 15y ago
  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.
- deleted 15y ago
  [deleted]
- jey 15y ago
  $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.
  - jonknee 15y ago
    Lefkowsky was already very rich before Groupon, there was never a worry he'd sell to pay his bills.
    - gojomo 15y ago
      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.
loglog1234 15y ago
people now understand the business model, knowing it is nothing just a bunch of sales rep selling coupons while ripping off small merchants. how many spa can you get a year?
pbreit 15y ago
Here's a thought: maybe like 10 of the previous 13 offerings, the reason has less to do with the company and more to do with the environment.
carsongross 15y ago
Meanwhile, Guidewire, a company that actually makes money, contributes to the technical world (Gosu (http://gosu-lang.org http://gosu-lang.org), The Aardvark Build Tool (http://vark.github.com/ http://vark.github.com/), etc.), that made the front page of TechCrunch because it has an upcoming IPO: http://techcrunch.com/2011/09/05/insurance-technology-company-guidewire-software-files-for-100m-ipo/ http://techcrunch.com/2011/09/05/insurance-technology-compan... And that was named "The Best Tech Company to Work For" http://www.businessinsider.com/the-best-tech-companies-to-work-for-2011-9#no-1-guidewire-is-like-a-graduate-computer-science-department-25 http://www.businessinsider.com/the-best-tech-companies-to-wo... By Business Insider has been almost totally ignored by hacker news. Hmmmmmm.
- philwelch 15y ago
  It's bad form to use the comments to complain that your employer isn't receiving enough attention on HN.
  - carsongross 15y ago
    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.
linuxhansl 15y ago
If Groupon goes public and does that successfully this will finally shatter my last hope for the sanity of the average investor.
- jeffdavis 15y ago
  Well said.
vishalkgupta 15y ago
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.
deleted 15y ago
[deleted]
franze 15y ago
some nice groupon.tld traffic charts http://trends.google.com/websites?q=+groupon.com%2C+groupon.de%2Cgroupon.fr%2Cgroupon.co.uk&geo=all&date=all&sort=0 http://trends.google.com/websites?q=+groupon.com%2C+groupon.... looks like they "diversified" their traffic.

97 points by zwieback 15y ago

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. [1] http://www.washingtonpost.com/ac2/wp-dyn/A14939-2004Aug19?language=printer http://www.washingtonpost.com/ac2/wp-dyn/A14939-2004Aug19?la...

JacobAldridge 15y ago

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 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).)

jonknee 15y ago
... 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.

0x12 15y ago

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. see also: http://www.businessinsider.com/groupon-cancels-ipo-2011-9 http://www.businessinsider.com/groupon-cancels-ipo-2011-9

ajcronk 15y ago

A theory: Groupon leaked the memo so that it would be forced to pull the IPO, similar to Wired in 1996.

dpapathanasiou 15y ago
And leave the G round investors, who put in $950 million in January (http://www.businesswire.com/news/home/20110110006746/en/CORRECTING-REPLACING-Groupon-Raises-Billion-Dollars http://www.businesswire.com/news/home/20110110006746/en/CORR...), holding the bag? It doesn't seem like something they'd do deliberately.
- ajcronk 15y ago
  Yes, that makes it interesting. Which is better for previous investors: IPO bomb or another private market raise?
  - dpapathanasiou 15y ago
    Can they go back and raise another private round? Who would buy in, with IPO off?

sudonim 15y ago

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.

mikeryan 15y ago
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?
- eric-hu 15y ago
  To get Google's attention, they just need to patent the idea of a 50% off coupon.
- felipemnoa 15y ago
  >>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? As if. That ship is going down fast and hard.
VladRussian 15y ago
"shotgun IPO"

JacobIrwin 15y ago

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-valuation-speculation/ 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.* *Estimated 1.6 billion in 2011 fiscal year.

0x12 15y ago
>that have filled Groupon's pockets with over a billion in cash. Having 'cash on hand' is great but it seems that groupon owes more than they have by a considerable margin: http://finance.yahoo.com/news/Groupon-is-Effectively-minyanville-3764150861.html?asset&ccode&pos=3&sec=topStories&x=0 http://finance.yahoo.com/news/Groupon-is-Effectively-minyanv... Also that article says they have 208 million in cash, not nearly the 1.6 billion that you mention.
- JacobIrwin 15y ago
  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/Groupon_Case_R2.pdf 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."

wpietri 15y ago

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.

dpapathanasiou 15y ago
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.
- rjbond3rd 15y ago
  > worst kind of cheapskate Exactly (the OP was being sarcastic :)
  - create_account 15y ago
    I think he gets it. He's being sarcastic, too.
- m0wfo 15y ago
  http://en.wikipedia.org/wiki/Sardonicism http://en.wikipedia.org/wiki/Sardonicism
  - create_account 15y ago
    http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29 http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29
minikomi 15y ago
Cue flash of someone pitching "A daily deal site for investors"
mkramlich 15y ago
Plus they could book any such stock purchases as revenue. Profit problem solved! I love creative accounting.

trotsky 15y ago

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.

deleted 15y ago
[deleted]
ForrestN 15y ago
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.
tokenadult 15y ago
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.

gojomo 15y ago

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.

felipemnoa 15y ago
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.
deleted 15y ago
[deleted]
jey 15y ago
$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.
- jonknee 15y ago
  Lefkowsky was already very rich before Groupon, there was never a worry he'd sell to pay his bills.
  - gojomo 15y ago
    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.

loglog1234 15y ago

people now understand the business model, knowing it is nothing just a bunch of sales rep selling coupons while ripping off small merchants. how many spa can you get a year?

pbreit 15y ago

Here's a thought: maybe like 10 of the previous 13 offerings, the reason has less to do with the company and more to do with the environment.

carsongross 15y ago

Meanwhile, Guidewire, a company that actually makes money, contributes to the technical world (Gosu (http://gosu-lang.org http://gosu-lang.org), The Aardvark Build Tool (http://vark.github.com/ http://vark.github.com/), etc.), that made the front page of TechCrunch because it has an upcoming IPO: http://techcrunch.com/2011/09/05/insurance-technology-company-guidewire-software-files-for-100m-ipo/ http://techcrunch.com/2011/09/05/insurance-technology-compan... And that was named "The Best Tech Company to Work For" http://www.businessinsider.com/the-best-tech-companies-to-work-for-2011-9#no-1-guidewire-is-like-a-graduate-computer-science-department-25 http://www.businessinsider.com/the-best-tech-companies-to-wo... By Business Insider has been almost totally ignored by hacker news. Hmmmmmm.

philwelch 15y ago
It's bad form to use the comments to complain that your employer isn't receiving enough attention on HN.
- carsongross 15y ago
  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.

linuxhansl 15y ago

If Groupon goes public and does that successfully this will finally shatter my last hope for the sanity of the average investor.

jeffdavis 15y ago
Well said.

vishalkgupta 15y ago

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.

deleted 15y ago

[deleted]

franze 15y ago

some nice groupon.tld traffic charts http://trends.google.com/websites?q=+groupon.com%2C+groupon.de%2Cgroupon.fr%2Cgroupon.co.uk&geo=all&date=all&sort=0 http://trends.google.com/websites?q=+groupon.com%2C+groupon.... looks like they "diversified" their traffic.