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Technology Stocks : Groupon, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (103)	9/1/2011 8:00:52 PM
From: Glenn Petersen	1 Recommendation Respond to of 480

Good article. Blodget has made the Amazon-Groupon comparison before. Andrew Mason’s Silicon Valley Problem: He’s Not Here By Sarah Lacy TechCrunch September 1, 2011 Earlier this year at All Things D, Groupon CEO Andrew Mason said one of his regrets was not opening an office in Silicon Valley earlier. The implication was that he was talking about not taking advantage of the superior coding talent, but I took it another way. Being in Silicon Valley is like playing for the Yankees. You get knocked around more than anywhere else, the glare of the media spotlight is more brutal and the expectations are higher than they’d be in any other city. You also get the coaching and, say, run support or bullpen arms that the most outrageously rich franchise in baseball history can afford. If you’ve got the chops, all of that undoubtably makes you a better player. Don’t get me wrong: I hate the Yankees. But I can understand on a professional level, why so many players leave teams I love to go play there. Similarly, a young wunderkind with a great idea coming to Silicon Valley will find no better place with more freedom to build his dream. This is perhaps the only place where millions are thrown at someone with no management experience, and board members will fight for a 20-something kid to stay CEO, even as mistakes are continually made. The cult of the founder can verge on reckless at times. But there’s a flipside to that: Every founder who makes it– no matter how much of a maverick they are– surrounds themselves with mentors and staff who help them avoid pitfalls. Mark Zuckerberg, for instance, has always been headstrong and no one would say Facebook is run by committee. And yet, he’s constantly sought out mentors and others with more experience who could guide him in certain areas. He’ll be the first to say without Sean Parker, he wouldn’t have known the importance of keeping so much control of Facebook’s board– a move that saved the company from being sold prematurely. Similarly, Marc Andreessen– another person who isn’t exactly shy and retiring– has frequently cited the impact of mentors like Jim Barksdale on his career, not to mention the sometimes moderating force of his partner Ben Horowitz. Most iconoclast founders I’ve covered in more than a decade in the Valley, bend far more from good advice than their personas would project. (Yes, even the headstrong Michael Arrington.) Behind all of the founders we like to think of as playing by their own rules are a team of people they’ve chosen who are have experience they lack. People who have been there before. They don’t always listen to them, but they recognize the value of surrounding themselves with them nonetheless. It’s that old adage of understanding the rules before you can break them. Mason simply hasn’t benefitted from the raft of mentoring, gut-checks, constant scrutiny, in part because Groupon is based in Chicago. But also because the company was such a phenomenon, growing so quickly, that many of its investors have come in on the company’s terms at much later stages. Like a spoiled only child, it has the dually corrosive reality of being a big fish in a small pond as the startup who put Chicago on the high-tech map, and a big fish in a big pond getting global attention, and all the kiss-ass press and money it could ever want. I don’t say this to knock Groupon or its CEO Andrew Mason. The company and the team have shown extraordinary natural ability. But like a child prodigy it’s been a victim of that easy success too. Because as every entrepreneur knows and Groupon is learning now, that phase of being the darling doesn’t last forever. An entrepreneur who’s grown up in the somewhat schizophrenic Valley ecosystem– a place where they are constantly built up with valuations and cash but also constantly torn down by haters and the endless scrutiny of the blogosphere and competitors– rarely has quite the same honeymoon Groupon has had. Or if they do, they are well aware from looking around them that there’s a shelf life to it. Witness the first backlash Groupon ever faced: Those Superbowl ads. They had to know, people would be offended. The ads were intentionally cheeky, like most things Groupon does. You don’t start an ad talking about saving the whales and then switch to a sushi ad and not expect to ruffle feathers. In terms of backlash, it wasn’t that severe, and yet the company pulled a dramatic about face pulling the ads and apologizing. People close to the company told me the executives were shocked at the modest hate mail being written about them, because frankly, they’d never experienced it before. Oh, but the backlash from the S1 would be so much worse, and Groupon has had little it can do about it thanks to the quiet period. Or should we call it the “quiet” period because the company’s frustration with the press and potential investors’ concerns about its financials and the future viability of its business have been clearly telegraphed, through cheeky ”leaked” emails and memos and tantrums by PR firms. Whatever Mason’s desired effect was, it’s not working. Even if it doesn’t piss off the Securities & Exchange Commission and derail the IPO, as Dan Primack of Fortune aptly Tweeted this morning, “It’s beginning to act like ex-child star who can’t believe the world is no longer enthralled by his cute-ness.” Perhaps the biggest misstep Groupon has made: Filing to go public so early in the first place. Every other break out company of this era has had one thing in common: Learning from the past that there’s nothing magic about going public and no reason to rush. Zynga, Twitter, Facebook, and LinkedIn all have had the benefit of all their ugly secrets and skeletons coming out well before they were in a quiet period and couldn’t respond. It’s the lesson that was made so clear by Google’s IPO: Wait until you are dominant enough that you can do it on your own terms. It’s hard to believe that would have been lost on a Valley-based Groupon. I’m not saying the stodgy old men of the Valley (read: People in their 30s and 40s) are the experts on how things should be done. Quite the opposite. The best entrepreneurs know when to ignore sage advice. After all, the advantage of the 20-something founder who has never had a job is that he isn’t personally invested in all the rules he’s breaking. But there’s nothing wrong with being told what those rules are and having a founder who will listen. techcrunch.com

To: stockman_scott who wrote (103)	9/2/2011 1:22:33 PM
From: Glenn Petersen	1 Recommendation Respond to of 480

The SEC may put Groupon in the penalty box: In a Quiet Period, Groupon Feels the Noise By STEVEN M. DAVIDOFF New York Times September 2, 2011, 9:03 a.m Groupon’s initial public offering is about to hit some very rough turbulence. The reason is that the Securities and Exchange Commission may force a postponement of the offering. The problem arises from an e-mail apparently sent last week by Groupon’s chief executive, Andrew Mason, to thousands of Groupon employees. In the e-mail, as reported by Kara Swisher at All Things D, Andrew Mason details his frustration at “getting the [expletive] kicked out of us in the press”. He disputes media reports about the company and defends Groupon’s proposed accounting metric of “adjusted consolidated segment operating income,” which excludes types of marketing expenses, currently about 20 percent of Groupon’s revenue. Mr. Mason then makes a spirited defense of company, stating that Groupon’s businesses are doing better than its competitors and seeing “unprecedented growth”. Unfortunately, Groupon is in the quiet period for its I.P.O. Under longstanding legal rules, once Groupon files its prospectus with the S.E.C., it is largely prohibited from sending out written communications to the public promoting its stock. These communication rules, which are quite intricate, dictate what a company can and cannot say once its I.P.O. document, known as a registration statement, is filed with the S.E.C. The guiding light is that a company should not be allowed to condition the market by hyping its stock through written materials that contain information not otherwise already in the registration statement or otherwise filed with the S.E.C. Instead, all of this material should be concentrated in one document, the I.P.O. prospectus, which is reviewed by the S.E.C. Companies can easily be tripped up by these rules. In 2004 Google came close to delaying its I.P.O. because of an interview its two founders gave to Playboy. The S.E.C. investigated and did force the company to file the article as part of its I.P.O. document. More tellingly, the S.E.C. forced the delay of an I.P.O. by Salesforce.com in 2004 because an extensive interview given by the company’s chief executive to The New York Times while the company was in the quiet period. The difference appears to be that Salesforce was in the quiet period while Google arguably was not. The communication rules were reformed in 2005 to allow a significant number of exceptions to the quiet period. None of these appear to be met here, however. Thus, since Groupon is also in the quiet period, the memo issued by Andrew Mason would likely be viewed by the S.E.C. as unduly conditioning the market but for one important fact. It was not circulated publicly but rather solely to employees. If past precedent is any guide, this will not save Groupon. The reason is the Wired Ventures failed I.P.O. Wired filed for an I.PO. in 1996. Remarkably similar to what Andrew Mason did, Wired’s chief executive sent out an e-mail to Wired’s 334 employees criticizing “shoddy, if not malicious” stories in the media about the company. He then asserted that the quiet period hampered his ability to respond but went on to detail why Wired was a great company. In the wake of the e-mail, the company withdrew its I.P.O. filing. The case highlights that mass communications to employees about the company’s prospects during the quiet period are likely to be viewed by the S.E.C. as impermissible conditioning of the market. It is communication to too many people and the agency considers these communications as too hazardous. There is too much potential for this information to seep out into the public and unduly condition the market. Moreover, this is particularly true in the case of Groupon, which is under the spotlight and the potential for leaks of the memo was enormous. Of course, if the company deliberately leaked the memo this would make an even stronger case. Groupon’s I.P.O, lawyers would never have let this memo go out if they had the opportunity to stop it. Unfortunately, as Connie Loizos wrote on PE Hub, it appears that these lawyers are losing control of this process. Groupon’s public relations representatives are reaching out to media and referring to the memorandum in discussions as Groupon’s view of the world. It appears likely that the S.E.C. will investigate this and may take some action that could delay the Groupon I.P.O. Of course, this puts the agency in a difficult position, because while it wants to enforce its rules, it also does not want to be viewed as hampering commerce. The communication rules even after being reformed are outdated and overly restrictive. They are also convoluted and hard to understand. For example, if Mr. Mason had merely broadcast this e-mail over a loudspeaker to his employees it wouldn’t have been a problem as oral communication is largely exempted so long as it is not recorded for playback. But still these are the rules. Andrew Mason appears to have crossed them. Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions. dealbook.nytimes.com

To: stockman_scott who wrote (103)	9/4/2011 8:03:15 AM
From: Glenn Petersen	1 Recommendation Read Replies (1) \| Respond to of 480

Assuming that Groupon can resolve its SEC issues: Lower valuation for Groupon IPO might not be so bad $5 billion could have been lost due to the controversy surrounding the daily deal site's planned initial public offering Melissa Harris' Chicago Confidential Chicago Tribune September 4, 2011 Shares of daily deals website Groupon recently traded at an implied valuation of $14.9 billion on SharesPost, a secondary market for equity in private companies. Sites like SharesPost and SecondMarket allow employees and other shareholders to unload their holdings while a company is still private. That could be an enticing option for some owners of Groupon shares, given the uncertainty about how the company's planned initial public offering will be valued. Critics have tried to poke holes at the staying power of the Chicago company's business model, which led CEO Andrew Mason last week to write a memo — quickly leaked — in which he labeled the skepticism "insane" and "hilarious." The memo in turn raised questions about whether Mason violated federal "quiet period" rules connected to impending IPOs. A $14.9 billion valuation would be a lot less than the $20 billion to $30 billion estimates heard in the days following its June announcement that an IPO is coming. It also suggests that the beating the company has been taking in the financial press, as well as fallout from the memo, is affecting investors. But in the long run, a lower valuation may not be so bad, some tech insiders have told me. It lessens the chance of Groupon's stock coming out with a bang, only to crater (and thus take a further public relations beating). It also likely is a more reasonable snapshot of what the company is worth, while still outstripping the $6 billion Google reportedly offered for the company less than a year ago. Mason and company Chairman Eric Lefkofsky, who are the decision-makers, already are plenty rich. They unloaded a large amount of shares months ago. <snip> chicagotribune.com