
Groupon To Sell 30M Shares At $16-$18 A Pop - sinzone
http://techcrunch.com/2011/10/21/groupon-to-sell-30m-shares-at-16-18-a-pop-valuation-as-much-as-11-4b/
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sc68cal
Anyone thinking about buying Groupon stock - check LinkedIn's after November
when the lock-up agreement expires.

LinkedIn, like many IPOs, had a lock-up agreement. That means that insiders
and venture capitalists (or investors who bought the stock pre-IPO on a
secondary marketplace like SharesPost) can’t sell stock for six months
following an IPO. This helps stabilize the stock in its early days. It also
leads to possible dips in stock value around the time of expiration. The
agreements for LinkedIn will expire in November.

[http://www.investmentu.com/2011/August/linkedin-good-
company...](http://www.investmentu.com/2011/August/linkedin-good-company-bad-
stock.html)

In Matt Taibbi's book, Griftopia, most of these stocks are little more than
pump & dump operations by finance industry, who collect some fees on the side.

 _Here’s how it works: Say you’re Goldman Sachs and Worthless.com comes to you
and asks you to take their company public. You agree on the usual terms:
you’ll price the stock, determine how many shares should be released, and take
the Worthless.com CEO on a “road tour” to meet and schmooze investors, in
exchange for a substantial fee (typically 6–7 percent of the amount raised,
which added up to enormous sums in the tens if not hundreds of millions).

You then promise your best clients the right to buy big chunks of the IPO at
the low offering price—let’s say Worthless.com’s starting share price is 15—in
exchange for a promise to reenter the bidding later, buying the shares on the
open market. Now you’ve got inside knowledge of the IPO’s future, knowledge
that wasn’t disclosed to the day-trader schmucks who only had the prospectus
to go by: you know that certain of your clients who bought X amount of shares
at 15 are also going to buy Y more shares at 20 or 25, virtually guaranteeing
that the price is going to go past 25 and beyond. In this way the bank could
artificially jack up the new company’s price, which of course was to the
bank’s benefit—a 6 percent fee of a $500 million or $750 million IPO was
serious money._

Taibbi, Matt (2010-11-02). Griftopia: Bubble Machines, Vampire Squids, and the
Long Con That Is Breaking America (pp. 213-214). Spiegel & Grau. Kindle
Edition.

~~~
byrneseyeview
That 6-7% is 6-7% of the offering price, not the day's closing price. So the
statement "In this way the bank could artificially jack up the new company’s
price," is the opposite of the truth: in this way, _the bank lowers its fee in
exchange for a first-day price increase_. That's marketing: Goldman wants to
be able to sell the next IPO, so they try to pay off their customers. And that
means they _can_ promise e.g. Groupon that they'll have enough buyers.

As usually, Taibbi is vaguely correct (investment banking is a middleman
between two groups that are individually worse-informed than the bank is). But
he either doesn't understand how this actually works, or deliberately obscures
the facts in order to make his point slightly stronger.

~~~
sc68cal
>So the statement "In this way the bank could artificially jack up the new
company’s price," is the opposite of the truth

You're taking issue with at what point Goldman Sachs takes their 6-7%, while
totally ignoring the main point: Goldman Sachs has engaged in laddering which
is considered fraud.

------
Tyrannosaurs
I'd like to suggest that is should read "Groupon to TRY to sell 30M shares at
$18 - $18 a pop" as I really don't think anyone in their right mind should buy
them.

Sadly much as I'd like to believe that this IPO will fall on stony ground I
suspect that there are enough people out there who'll snap it up that they'll
get their money.

Odd how we can be in a global economic crisis and a bubble at the same time.
Strange times.

~~~
mbesto
It will definitely sell for that much. After 4 days it will reach its all time
high and then plummet. Pump and dump!

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rationalbeaver
I'm not going to buy it until it goes on sale for 90% off.

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lien
i would never buy groupon stock. this is a doomed biz model because it's not
based on any real technology...the entire company is mostly comprised of only
salespeople, which is pretty scary.

~~~
jemka
>this is a doomed biz model because it's not based on any real technology

Neither is Dairy Queen, but everyone knows if they want delicious vanilla soft
server where they need to go. Likewise, millions of discount seeking customers
know that a place to go to find discounts is Groupon.

Groupon is doomed if they can't get revenue above their operating costs. It
has nothing to do with the technology they are based on.

~~~
dusing
No one makes Dairy Queen soft serve but Dairy Queen. Everyone makes 50% time
based group coupons.

~~~
jemka
The point was that Dairy Queen isn't based off some spectacular technology.

> Everyone makes 50% time based group coupons.

Everyone? That's silly. Do you mean the coupon market is saturated? I would
agree. But Groupon is at the very top. How does that doom them?

~~~
lien
Dairy Queen has physical locations, serving that specific location and market.
It takes time for the company to do research on specific market segment and
why there needs to be a physical location there. It also takes time to build,
train, and hire employees in order to service that market.

Groupon: user is only sustainable based on type of deals. business model
easily replaceable by any upcoming player.

plus there's so many things going inside the company right now...Groupon's own
sales team is suing the company? come on, what does that speak to the company
itself? the whole company is made up of salespeople!!

~~~
lien
jemka, my point is that Dairy Queen has more real technology than Groupon.
Their icecream is their product. Groupon has none. Groupon has coupons as a
product and that's not a technology. Icecream is!!

~~~
jemka
The point you're painfully missing is that success of a company (including
Groupon) isn't dictated by how much or little technology they use. If you feel
Dairy Queen was a bad metaphor for that, then I apologize for your confusion.

~~~
lien
Sure, Groupon is successful, but is it sustainable? To me, it's not a good
business model because it could be easily copied, easily replaceable, and
anyone could do it. Short-term success doesn't translate into a sustainable
business model.

