What I'd really like to know is what the G round investors were thinking: did they not expect Groupon to use that round to pay off early investors and employees, or was that part of the plan?
They believe that the IPO will be huge regardless of Groupon's health, and there's a lot of money to be made on it, so they're purchasing -- from the early investors -- access to pre-IPO stock.
That level only makes it harder for them to realize a high return.
It'll be interesting to see what effect all this public criticism of the S1 filing does to the opening day price.
The investors in the last round knew that the money was being used to cash out the early shareholders. No one is claiming fraud.
That can be true for investors, but employees typically have to wait years to be able to cash out their shares.
If Groupon in the long term is the bomb the S1 indicates, an IPO is not a great deal for employees (unless they already got theirs in the G round, of course).