
Groupon IPO on hold - zwieback
http://www.reuters.com/article/2011/09/06/groupon-ipo-idUSN1E7851CF20110906
======
wpietri
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
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.

~~~
m0wfo
<http://en.wikipedia.org/wiki/Sardonicism>

~~~
create_account
<http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29>

------
0x12
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>

------
gojomo
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.

~~~
jey
$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
Lefkowsky was already very rich before Groupon, there was never a worry he'd
sell to pay his bills.

~~~
gojomo
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.

------
trotsky
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.

~~~
ForrestN
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.

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

~~~
jeffdavis
Well said.

------
sudonim
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
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?_

~~~
felipemnoa
>>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.

------
pbreit
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.

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

~~~
dpapathanasiou
And leave the G round investors, who put in $950 million in January
([http://www.businesswire.com/news/home/20110110006746/en/CORR...](http://www.businesswire.com/news/home/20110110006746/en/CORRECTING-
REPLACING-Groupon-Raises-Billion-Dollars)), holding the bag?

It doesn't seem like something they'd do deliberately.

~~~
ajcronk
Yes, that makes it interesting. Which is better for previous investors: IPO
bomb or another private market raise?

~~~
dpapathanasiou
Can they go back and raise another private round? Who would buy in, with IPO
off?

------
JacobIrwin
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-
val...](http://jacobirw.wordpress.com/2011/06/18/groupon-pre-ipo-valuation-
speculation/)

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
>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-
minyanv...](http://finance.yahoo.com/news/Groupon-is-Effectively-
minyanville-3764150861.html?asset&ccode&pos=3&sec=topStories&x=0)

Also that article says they have 208 million in cash, not nearly the 1.6
billion that you mention.

~~~
JacobIrwin
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/G...](http://www.tuck.dartmouth.edu/cds-uploads/case-
studies/pdf/Groupon_Case_R2.pdf) \-- see bottom of page two, second-to-last
paragraph in the section titled, "The Fastest-Growing Business in History."

~~~
jacques_chester
> Revenue is also cash

Please read an Accounting 101 textbook to learn why this isn't true.

~~~
JacobIrwin
"Revenue is calculated by multiplying the price at which goods or services are
sold by the number of units or amount sold." - Investopedia

You may be thinking of 'marginal revenue' perhaps. I am talking to both of
you.

Tell me to read an accounting book - sure, if I have time after I am done
buying a basket of financial sector out-of-the-money put options for the
boutique hedge fund I manage this morning, I will be sure to do that. So yeah
- while, I am brushing off my old 101 book, maybe you can try not to make
yourself sound foolish in front of audience next time.

[http://www.investopedia.com/terms/r/revenue.asp#axzz1XG80Hyj...](http://www.investopedia.com/terms/r/revenue.asp#axzz1XG80HyjP)

^^^ Definition of 'revenue'. I.e., 'gross,' 'top-line,' 'nothing to do with
expenses; yet.'

[http://www.investopedia.com/terms/m/marginal-revenue-
mr.asp#...](http://www.investopedia.com/terms/m/marginal-revenue-
mr.asp#axzz1XG80HyjP)

^^^Definition of 'marginal revenue.'

<http://dictionary.reference.com/browse/plebeian>

^^^Those that, by definition, never make it to the top 1%; ya both.

~~~
jacques_chester
I'm very happy that you can buy baskets of financial sector out-of-money put
options for boutique hedge funds and still find time to use Google.

However, you are still wrong. In accounting, revenues are not the same as
cash. A revenue event may be committed to the books well in advance of cash
changing hands, and indeed the first step for most revenue is to be entered
into accounts receivable.

What we are discussing here the difference between cashflow and revenue, which
is a critical question for investors because of the way Groupon is choosing to
run its books.

If you would be so kind as to tell me the fund you work for, I would be
grateful. It is my intention never to invest in such a firm.

~~~
JacobIrwin
We only invest for clients in the net worth range of $100k+.

Just go back and read the entire first sentence that you continue to quote:
"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."

... clearly not a Merriam-Webster quote - rather my own; to describe a simple
concept: Groupon makes money (see definitions: USD; cash) - potentially, these
resources could be spent more efficiently.

In regards to Mark-to-Market Accounting, an simple example could be for when a
journal entry is made in/debit to 'Accounts Receivable' - you're right, this
has not effect on the cash balance.

So your point is valid, but contradictory. Because amounts under ‘Accounts
Receivables’ are not considered revenues – assets (maybe, but still not
exactly) - but certainly they cannot be called revenues. As receivables are
earned, they are transferred to 'Cash,' under assets and now it’s both a
revenue and cash.

Also, companies rarely sit on receivables. Instead, they factor them (or
borrow against them) and "Voilà!"... cash!

The majority of business owners believe they can invest these amounts and make
a higher return than they are being charged in interest.

That all being said, I think your point there isn't very strong.

~~~
jacques_chester
Thank you, this is a much better reply.

The two objections I've seen to Groupon's accounting practices are:

* They had that weird metric which miraculously showed them being wildly profitable, and

* They have a long lag time for collecting actual cash, but still book the groupon cut as revenue in a given period.

The reason people get anxious about the second point is because revenue isn't
cashflow. Groupon has amazing revenues on its books, but cash-wise it seems to
play things close to the line.

It's a problem because it makes Groupon highly unpredictable. If a significant
fraction of groupons begin to fail (and at any point in time the majority of
Groupon's groupons have not been present cashflow) then Groupon is stuffed.
And with only 3 years of operations, all of them exceptional and not steady-
state in nature, it's hard to say what will happen.

You say "Revenue is also cash - before expenses". That's still not correct.
Revenue can be booked before cash, cash be taken that isn't revenue. Sometimes
cash comes in advance. The key point is: Groupon can book revenues that aren't
backed by cash, and they have done so aggressively. And given their apparently
high costs and relatively small cash reserves, it's basically a smoke-and-
mirrors act.

They could borrow against their A/R, but it wouldn't be cheap given the
factors outlined above. Whether they succeed or not still relies totally on a
low bad-debts rate, regardless of what they can borrow.

~~~
JacobIrwin
Right on.

------
vishalkgupta
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.

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

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

------
JacobAldridge
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> . _(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
... 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.

------
carsongross
Meanwhile, Guidewire, a company that actually makes money, contributes to the
technical world (Gosu (<http://gosu-lang.org>), The Aardvark Build Tool
(<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-
compan...](http://techcrunch.com/2011/09/05/insurance-technology-company-
guidewire-software-files-for-100m-ipo/)

And that was named "The Best Tech Company to Work For"

[http://www.businessinsider.com/the-best-tech-companies-to-
wo...](http://www.businessinsider.com/the-best-tech-companies-to-work-
for-2011-9#no-1-guidewire-is-like-a-graduate-computer-science-department-25)

By Business Insider has been almost totally ignored by hacker news.

Hmmmmmm.

~~~
philwelch
It's bad form to use the comments to complain that your employer isn't
receiving enough attention on HN.

~~~
carsongross
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.

