Groupon Plunges as Board Members Reportedly Leaving
thestreet.com
thestreet.com
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.
If Google did infact have the chance to look at the books (which I'm sure they did), and then allow that "$6bn meme" to circulate -- well, that's evil isn't it?
If that wasn't true, someone in Google did have obligation to deny it - denying it off record with no further comment would hardly have been saying a lot.
To expand on that a bit: If google had made public what they thought they found they would have been very much open to a lawsuit with some significant chance of success.
Breaking an NDA in such a situation is unheard of, every investor is supposed to make up their own mind and do their own homework before they decide to invest or not.
Any legitimate concerns about this would revolve around the question of whether or not groupon was forthcoming in their pre-IPO filings. If there is any proof to be found with google you could try to persuade a judge to grant a subpoena of people at google familiar with the deal, but google should never by themselves reveal any of this.
So: no, not evil.
If the story is true, it seems very strange that they wouldn't set the record straight (obviously without breaching any confidences or disclosing anything specific about Groupon).
I'm not sure they'd have made more in that deal. Honestly most of the folks invested early made a ton of money and now the guys at the backend are looking for a chair as the music ends.
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)
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.
Im sure if nothing has changed since the early days of groupon till now, the skeletons now are still the same as before, google was just smart about it, did the math and said no way and allowed Andrew to walk away and speak about the deal however he wished.
On another note, if groupon collapses is it a good thing for the daily deals market ie, more smaller ones take their place, better competition better monetization strategy or does it spell the end for this market ?
What do people think ?
Normally I have a rule of "never short". Wish I'd broken it this time :-(.
Remember, stocks can go to zero!
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.
"With their deep financial, accounting and operational experience"
hmm.... I wonder why they'd need financial and accounting help.
"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-g...
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]
Needing financial engineers on your audit committee is a giant red flag that your financials don't make sense.
http://www.amazon.com/Days-Reporters-Uncovered-Destroyed-Cor... (Probably not worth the read. Enron short nags WSJ reporters about WTF SPEs in Enron filings. WSJ finally asks Enron and gets gobbledygook instead of explanation. Boom.)
Grab the popcorn folks, the fun is starting.
Actually, that is (in my mind) the biggest current one - the sales stuff is bad, but the accounting and operations stuff is Bad.
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.
except user acquisition costs on both ends of the transcation, which are ridiculous. i doubt there is a single small business in the USA that hasn't had contact with GroupOn, or a single discount shopper who hasn't heard of them through their marketing.
I understand this is just one company, but what I'm wondering is if this could have a domino effect.
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.
Assume, but verify.
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.
PS: I think people have been doing the same thing from at least the 1950's if not earlier.
I'd be very surprised, as the capital outlay to start even a small ASIC team is not small. A single simulator license costs considerably more than what the fine folks at YC invest in the companies they have under their wing.
(I don't think it needs to be that way, BTW).
The time to design chips correctly is 10x-20x higher than doing the same in c++ (let alone a higher level language).
Example: in my previous company we needed to do some Jpeg decode in hardware. You have to buy a library for that. The library aint cheap so you have to evaluate vendors first, then work with lawyers to negotiate a licensing agreement. Then you design, implement, and test integration into your chip. All of this takes 2-3 man-months.
By contrast, we prototyped it in sw in an afternoon, and could be out the door with tests and production polish in less than a week.
You can use fpgas or low-NRE ASICs like eASIC to reduce the build costs, but engineering hardware is really slow.
Added: Yes there will be collateral damaged.
They are dotcom. They operate a website and they send their deals by email. The founder is young, does silly things (cat on head picture not something they do at Boeing or GE) and has been profiled in major media. They will be associated with tech whether deserved or not.
Defacto. If there was no connection nobody in our "business" would be talking about it.
Here's the recent IPO's. Splunk is tech. Nobody else has any connection and would never be mentioned as "dotcom" or tech.
There may be a world of folks who think Groupon = tech = uses email = young, but that definition presupposes failure for all tech companies because of their inherent silliness.
(Also, a lot of brokerages won't allow you to write naked calls)
Disclaimer: I own a few grpn puts.
Here's an askmefi thread that may interest with more detail, and note it dates back to November:
That sounds eerily similar to todays climate.
Maybe their business model is unsustainable, but its nothing like a Ponzi scheme.
However, the "Ponzi" thing stuck out at me much harder.