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Groupon Plunges as Board Members Reportedly Leaving
- rollypolly 15y agoCould this be the beginning of the end of Bubble 2.0? I understand this is just one company, but what I'm wondering is if this could have a domino effect.
- antr 15y agosuch statement is a bit far fetched. imho GRPN is no real tech company, and investors (traditional asset managers) know this. on the other hand, if GRPN goes bust, the reputation of Accel, Andreessen Horowitz, Battery Ventures, DST and Kleiner Perkins, will be clearly damaged towards IPO investors.
- davidmr 15y agoIf the last 5 years have taught us any lessons at all, it's that assuming traditional asset managers know anything--no matter how obvious--can get everyone in a terrible amount of trouble. Assume, but verify.
- deleted 15y ago[deleted]
- ChuckMcM 15y agoNo. However, it will delight folks who are predicting the death of Groupon
- jinushaun 15y agoCorrection: Folks who have been predicting Groupon's death since pre-IPO.
- huggyface 15y agoGroupon is hardly even a tech company, and their business model is one that has been seriously criticized since the outset. There will be little collateral damage from their decline.
- calpaterson 15y agoPets.com was not ostensibly a tech company either. Their business model was also criticised. There was much collateral damage from their decline.
- corin_ 15y agoBack then selling products online was enough to make you a "tech company", it's a very different landscape out there now.
- Mizza 15y agoSo how many YC companies are "tech companies" by today's definition, then?
- corin_ 15y agoGood question, and I think the answer has to be subjective. My attempt at an answer: companies that either do things that couldn't be done before they were online because of the nature of the product/service, or where it couldn't be done before because the code has is complex. So pets.com, really they were doing what shops had been doing for years, they just happened to do it online. Reddit on the other hand, there's not really an offline equivilent. Hipmunk, there's offline equivilents (travel agents) but the tech behind Hipmunk is what makes is a good company, not just "we've moved our travel agency online". But yeah, no doubt there are YC companies that aren't necceasrily "tech companies", and on the other side there are companies not thought of as tech companies where technology plays a huge, huge role.
- hdctambien 15y ago
- kin 15y agoI think that at most it will make investors maybe think twice about the potential of a company. For the most part there shouldn't be any adverse affects on other companies. Especially the other ones that have gone IPO recently, they're all doing well.
- wpietri 15y agoI forget. What's the markup for Nelson's ha-ha noise?
- div 15y ago<schadefreude></schadefreude> ?
- Alex3917 15y agoWhen board members quit unexpectedly like this it usually means they have discovered that the management is doing something unethical and they don't want to be held legally liable for it, which they would be if they stayed. This is likely a sign that we're going to see another scandal or two coming out of Groupon in the next few months, possibly one that tanks the company completely. Wall Street knows this, which is why the stock took such a beating today.
- kin 15y agoBesides the occasional unethical sales methods by some of its employees, were there any other scandals that I'm not aware of?
- pyre 15y agoThe 'creative' accounting on their initial IPO paperwork was a scandal of sorts, but I don't think it left the IT blogosphere.
- ssmall 15y agoThey talked a fair amount about it on Marketplace, a public radio show about business and economics. Still isn't exactly mainstream but its outside the tech news circle.
- mcknz 15y agoPresumably the board members are leaving because of a yet-to-be-public scandal.
- mitchellhislop 15y agoMostly the shoddy/incorrect/fake accounting issues that have gotten them in hot water with the SEC. Actually, that is (in my mind) the biggest current one - the sales stuff is bad, but the accounting and operations stuff is Bad.
- mikemarotti 15y agoIs it too late to think about shorting this stock?
- antr 15y agoCurrent market cap (equity value) is $6.8bn, with negligible income. It'll be interesting to see how much longer GRPN takes to trade at fundamentals.
- infocaptor 15y agoThey should have taken the $6 billion Google offered and still come out as heroes
- mcknz 15y agoYes. Probably no stock available to borrow. There are put options but those are likely already at a premium.
- dxbydt 15y agoYeah but he doesn't have to do straight puts. He ca do a synthetic short. The June 9 puts are a dollar, as are the 11 call. So you sell the 11 call & buy the 9 put with the proceeds. Essentially you pay absolutely nothing. On June 12, if grpn stays below $9 you make the difference. If its between $9 and $11 you are ok as well. If its above $11, you cough up the difference. (Am NOT endorsing this trade - just pointing out that it does exist.)
- usaar333 15y agoThe premium is showing there though. This trade isn't even profitable unless grpn goes below $9 (and even then earnings are only $9-grpn_price). If grpn goes above $11, you lose grpn_price - 11. In other words, this is like shorting, only with $2 less on the upside - and that's where the premium shows. It's cheaper than buying straight puts, but way riskier. (Also, a lot of brokerages won't allow you to write naked calls) Disclaimer: I own a few grpn puts.
- AlexMuir 15y agoWhen a director with a lot to lose (Howard Schultz) leaves so suddenly, one can guarantee that there's something coming which significantly threatens his position outside Groupon and/or reputation. So much so, that he is willing to piss off investors, employees and co-directors by upping and leaving. I suspect that the writing is on the wall for Groupon. I'm going to predict that it won't see 2013 without serious restructuring, write-downs and possibly bankruptcy.
- mikeryan 15y agoNote he's also being replaced by a VP from Deloitte and AMEX's CFO "With their deep financial, accounting and operational experience" hmm.... I wonder why they'd need financial and accounting help.
- trotsky 15y agoFor what it's worth, these two were both on the audit committee which was criticized in the wake of the earnings restatements last month: "Groupon needs a new audit committee with much more financial expertise," said James Post, a management professor at Boston University. http://articles.chicagotribune.com/2012-04-12/business/chi-groupon-accounting-problems-put-spotlight-on-board-20120412_1_groupon-investors-for-aggressive-accounting-audit-committee http://articles.chicagotribune.com/2012-04-12/business/chi-g...
- ahi 15y agoI don't really buy that. If CFO and auditors are doing their job any reasonably competent business professional can provide adequate oversight. If the board member isn't capable of adequate oversight the problem lies with the financial information they are being given, very rarely the board members.
- trotsky 15y agoYou're not really providing much oversight if you're only able to detect problems when they're pointed out to you. Enron's audit committee was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to properly question the auditors on accounting questions related to the company's special purpose entities. The committee was also unable to question the company's management due to pressures placed on the committee.[59] The Permanent Subcommittee on Investigations of the Committee on Governmental Affairs' report accused the board members of allowing conflicts of interest to impede their duties as monitoring the company's accounting practices. When Enron fell, the audit committee's conflicts of interest were regarded with suspicion.[60] https://en.wikipedia.org/wiki/Enron_scandal#Audit_committee https://en.wikipedia.org/wiki/Enron_scandal#Audit_committee
- nollidge 15y agoWhat I'm wondering: are any of Groupon's competitor's (AmazonLocal, LivingSocial, Google Offers, etc.) more likely to succeed? Or is the business model the biggest problem here?
- Karunamon 15y agoI'm guessing the business model, or at least Groupon's implementation of it. The stories of companies who lost absurd amounts of money on Groupon deals and made none of it back are starting to pile up.
- moron 15y agoI wonder the same thing. I have friends working at LivingSocial, but also something about the whole business bothers me, so I'm never sure how to feel. I don't want their company to fail for their sake, but I don't really believe in it.
- suresk 15y agoI don't think the business model is quite as horrible as some make it out to be, but it certainly doesn't seem to warrant a $6+ billion valuation for Groupon and doesn't really bode well for some of its competitors. I see two major problems Groupon is facing: 1) Limited long-term market A lot of companies have had negative or even disastrous results from using Groupon. It is clear that it isn't a good option for a lot of businesses, as it can be very costly and a lot of the customers don't return. I see two viable long-term markets for the sort of deals Groupon offers: 1) High-margin businesses where most of the expenses are related to advertising, and 2) brand new businesses with a big enough marketing budget to take a one-time hit to get their name out. This is still a pretty big potential market, but I don't think it is big enough. 2) Almost zero barrier to entry Despite being called a "tech" company, Groupon appears to have very little interesting technology, and there is almost no barrier to becoming a competitor. More worrisome than the national competitors (ie, Google, Amazon, and LivingSocial) are the local competitors, such as TV stations, newspapers, universities, etc.. They already have established relationships with local businesses and almost certainly have lower sales costs, plus they often don't need the margins that Groupon does and can offer merchants better deals. I see Groupon dying from fighting with a thousand other fish over a pond that is a lot smaller than originally thought. National competitors like Amazon and Google that can use other aspects of their business to lower acquisition costs and/or increase the revenue per deal might have a shot at doing well in the long term. I can tell you one thing - as a Google shareholder, I'm really glad they ended up not spending $5 billion on Groupon.
- janlukacs 15y agowe'll be reading the same about Facebook in a couple of years? most probably.
- scarmig 15y agoFacebook is bubbly, but there's a world of difference between having your value inflated by a bubble and what's effectively accounting fraud.
- ljlolel 15y agoGroupon is definitely worse than Facebook, but still, http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme
- mikeash 15y agoSeems like any financial structure that isn't indefinitely sustainable gets described as a "Ponzi scheme" these days. What that post describes isn't a Ponzi scheme at all. The defining characteristic of such a thing is using the money from new investors to pay returns to old investors, thus making the investment appear legitimate. It's completely unrelated to Facebook advertising. Maybe their business model is unsustainable, but its nothing like a Ponzi scheme.
- fennecfoxen 15y agoI'm not even sure that their business model is unsustainable. The growth that would be necessary to justify their current valuation is probably unsustainable, mind you. But there's easily a good little business there. It just happens to not be worth 7 billion dollars :)
- mikeash 15y agoSame here. I was really skeptical of the claim that Facebook advertising isn't worth the money. I think it's far more likely that it is worth the money if you sell the right sort of thing, and this guy just moved in circles where people didn't sell things that advertised well on Facebook. However, the "Ponzi" thing stuck out at me much harder.
- tedsuo 15y agoTo what degree were people predicting the fall of pets.com before it happened? Anyone remember? I think that's the key insight into how the fallout of a groupon meltdown would affect the rest of the industry.
- mkr-hn 15y agoGood place to start: https://www.google.com/#q=pets.com+bubble&hl=en&prmd=imvns&sa=X&source=lnt&tbs=cdr:1%2Ccd_min%3A1%2F1%2F1998%2Ccd_max%3A12%2F31%2F2002 https://www.google.com/#q=pets.com+bubble&hl=en&prmd...
- MortenK 15y agoThat link lead me to a NY times article from december 2000 with the following paragraph describing the height of the 1999 bubble: "Even the most traditional brokers and investment banks set aside the notion that a company's stock price should reflect its profits and urged investors not to miss out on the gold rush." That sounds eerily similar to todays climate.
- chrisacky 15y agoBig fat I told you so (to anyone on HN I've predicted this to in the past)... Board Member/Director leaves... and what this signals: [1] Employees Confused. [2] Investors are going to really pissed off. [3] Stock is most likely going to continue to fall. (The signalling from this step down is huge). [4] It hints at possibility that the directors have had something to hide; something has been discovered; they have been secretly pushed out; or they have found out that something unethical has been going on in higher management and want to distance themselves from the company. Put another way, jumping out of a company when you aren't even pushed, when you are massively vested in it's success pretty much signals to everyone that Groupon is a sinking ship. If they haven't filed bankruptcy by 2013 I'd be mightily impressed! I can't wait to hear what Rocky Agrawal has to say about this.
- joering2 15y agoanyone would want to invent a time machine for a cool $5 billion dollars?? because that much Andrew Mason would pay you to get back to the table split seconds before he said "no" to Google's "we will pay you $6 billions for your website".
- hkmurakami 15y agoWhy would Andrew Mason pay $5billion when the company is still worth $6.83B today? Giving away $5B to get the company's valuation to $6B would only make sense if Groupon were valued below $1B right now. (unless you're insinuating that in the near future, Groupon will be below this threshold, or even in bankruptcy)
- joering2 15y agoits only worth $6 on your favorite stock website, same way as I am telling you this post is worth $100B just because I say so. By the time they would find someone to buy it (had to announce somehow to find a buyer) and sign all the documents, the stock would be a penny one, with a market cap around $500MM. Groupon stink before IPO and it will make people shorting it extremely rich, and unless rules of basic math like 1+1=5 or rules of economy won't change overnight, this will be one of the biggest deadpool everyone post-internet era has seen! I already bought a popcorn.
- api 15y ago... and the poster boy for boiler room business philosophy in the startup world implodes ...
- deleted 15y ago[deleted]
- moocow01 15y agoI wonder if the true bubble is just the number of shady businesses run by shady executives on shady accounting principles.
- obtino 15y agoIt's like watching a train-wreck in slow motion. It's a pity that this stock couldn't be shorted due to the lack of people willing to lend their holdings.
- deleted 15y ago[deleted]