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

To: Glenn Petersen who wrote (183)	11/8/2011 5:17:53 PM
From: stockman_scott	Respond to of 480

Ranting About Groupon (Comic) allthingsd.com

To: Glenn Petersen who wrote (183)	11/8/2011 6:29:42 PM
From: stockman_scott	1 Recommendation Respond to of 480

Wall Street Rakes in $42 Million From Groupon IPO blogs.wsj.com

To: Glenn Petersen who wrote (183)	11/8/2011 6:36:08 PM
From: stockman_scott	Respond to of 480

Why Groupon May Fizzle news.yahoo.com

To: Glenn Petersen who wrote (183)	11/8/2011 7:55:34 PM
From: stockman_scott	1 Recommendation Respond to of 480

For Groupon, The Really Hard Work Starts Now forbes.com

To: Glenn Petersen who wrote (183)	11/10/2011 11:38:05 PM
From: stockman_scott	1 Recommendation Respond to of 480

Groupon Is Hot, but Is It Strong Enough? nytimes.com By DAVID GREISING November 10, 2011 For Kevin Willer, chief executive of the Chicagoland Entrepreneurial Center, Groupon’s $700 million initial public offering last week could be the start of something big. “Until now, we haven’t had a massive tent pole, something that can create a lot of wealth for investors in Chicago, who in turn can create more wealth,” Mr. Willer said. Take a look at the Groupon tent pole, though, and it is unclear whether the company will be strong enough to support itself, much less bear the weight of the Chicago tech community. There are ample reasons for skepticism about Groupon. Yet in the run-up to the I.P.O., once all the caveats were aired, there were still enough emptores for a $20-a-share offering. That is how markets work. Groupon was the biggest I.P.O. since Google’s in 2004, which means there are plenty of investors who believe its easy-to-copy business model can stand up to competitors like Google Offers, the Amazon-backed Living Social, and hundreds of locally oriented upstarts. They were not bothered when Groupon’s founders Andrew Mason and Eric Lefkofsky ran afoul of Securities and Exchange Commission rules against hyping I.P.O. stocks. Investors even seem to be all right with Groupon’s adventuresome accounting. The company was forced to abandon one measurement designed to make its huge marketing expenses disappear, but then quickly changed gears toward two new shiny objects for its financial statements: “Cumulative customers” counts every person who has ever bought a Groupon, and “cumulative repeat customers” tallies all those who have ever bought more than one. What is good about such metrics? The two measures are guaranteed to keep going up and up and up. The cumulative-customer data has nearly zero practical value for investors, but it sure looks fine on a quarterly graph. With Groupon stock holding steady on the open market, investors who ignored the naysayers may be glad they did, and Chicago has an Internet darling to call its own — at least for now. It is unfortunate, though, that in preparing Groupon for its I.P.O., the founders Mr. Mason, Mr. Lefkofsky and Brad Keywell made questionable decisions. To stay ahead of competitors, Groupon— which could not comment because a quiet period mandated by the Securities and Exchange Commission is still in effect — needs to grow quickly. Yet Groupon founders and other insiders took $940 million that the company needs to revitalize its growth by selling stock back to Groupon in two separate transactions last year. That represented 84 percent of the total money raised until then. Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, said he had never seen anything like it. Reviewing the some 3,000 companies that have gone public since 2000, Mr. Hamadeh found nothing close to the proportion that Groupon’s insiders clawed back. Google’s founders, Larry Page and Sergey Brin, took no money before their I.P.O., he said. More recently, the founders of LinkedIn, another big I.P.O. this year, got back only about 5 percent of their investment before LinkedIn went public. There is a chance the $940 million in payouts to Groupon’s founders can do Chicago’s nascent start-up scene some good. Mr. Lefkofsky and Mr. Keywell have backed other local ventures. But that does not help Groupon, where cash will be tight even after the $700 million stock offering. Off the top, upward of $50 million went to investment bankers. And there are other bills coming due. As of the end of June, Groupon owed $392 million to merchants who ran Groupon deals — payments that are most likely due within the next 30 to 90 days. The figure is more than double what it was at the end of last year. The company reports a positive cash flow, and said in a filing that proceeds from the offering should last at least 12 months. But Groupon lost $254 million through June. It laid out $432 million on marketing in the first six months, and it needs to keep spending to have a chance of success. It’s no wonder Groupon is expected to conduct a second stock offering early next year. Mr. Willer of the Chicago entrepreneurs’ center acknowledges Groupon’s challenges, and warns that Chicago’s tech scene cannot rely only on Groupon. “If you’re going to create something in the long term,” he said, “you shouldn’t just be talking about Groupon all the time.” With drama likely to surround Groupon as far as the eye can see, sometimes it’s hard to imagine talking about anything else. dgreising@chicagonewscoop.org