Here is one comment at: http://dealbook.nytimes.com/2011/10/17/the-missed-red-flags-on-groupon/ "The blatant disregard for the fiduciary responsibility of Groupon and the underwriters' executives is criminal. The idea that a company that does not create a tangible product, Groupon is service, could be allowed to work on a "working capital deficit" is irresponsible. This is just a fancy phrase for ponzi scheme. Groupon needs to acquire new vendors in order to fully pay off the old vendors. Sounds exactly like Madoff investment strategy. " Quote from the article: "Hereâs just one data point: Groupon has $225 million in the bank. The company lost $102.7 million in the last quarter on revenue of $878 million. In total, as of last quarter, the company had $681 million in current liabilities but only $376 million in assets. Among its liabilities, it owed $392 million to vendors. That is because the company receives money from customers before it has to pay its vendors, called a working capital deficit. The company also spent $432 million in the first six months of the year on marketing, an unsustainable model. Add in the fact that Grouponâs revenue slowed in August, up only 13 percent, compared with 96 percent in the first half of the year, according to Yipit Data, and the picture becomes a bit nerve-racking."
Thanks for the link, that article very accurately outlines the groupon mess. The bottom line, IMO, is whether this can be legitimately called a ponzi scheme. Citi bank putting all of their bad holdings in a separate corporation sounds like Enron, but like groupon, is it a punishable ponzi or is it a bad business model that everyone should be aware of? I think because groupon's antics are available for everyone to see is what separates this from an illegal mad off scheme, which is intentionally under wraps.
It isn't really a Ponzi in the true sense of the word, but what makes it a quasi-Ponzi are: 1. It has an unsustainable business model that needs constant growing of costumer base to pay off the current costumers. 2. The creative accounting makes it look more profitable than what it really is. So there is the secrecy factor... Now the article blames the underwriters of the IPO too, they are supposed to be gatekeepers and not enablers of bad business models.... Here is another comment, about an experience: "I saw this play out at a lovely little Italian restaurant when a couple at a table next to ours hectored the waiter to bring them this and that because their Groupon coupons - which they kept flashing at him with their Androids - mandated it. They swooped in, grabbed, and left paying almost nothing. After their obnoxious presence was gone, we asked the waiter how Groupon was treating his restaurant. He confided that the owner gave it a try and it's been a disaster. (Of course it was disaster . . .) "
1. They need growth in customer base to pay off acquisition costs of new customers. 2. Their accounting is not really secretive. Just BS. There is no chatter of cooking the books.
Why don't you just come out and admit it. This is just a complete con job business model. Essentially gives new meaning to "Jewing someone out of a buck".
Today it hit a low of $17.25 after the news: " stock price tumble after a recent report found that most business owners who previously offered a daily deal have no plans to do so again in the next six months."
...I've often thought of starting a competitor to undercut them and call the company Poopon Groupon - Triumph the comic insult dog would be our mascot.
http://blog.agrawals.org/2012/03/31/why-groupon-is-poised-for-collapse-an-update/ "Groupon (GRPN) is "not a coupon company," writes Rocky Agrawal following the firm's Q4 restatement, it's "essentially a sub-prime lender that does zero risk assessment." Agrawal slates Groupon for a variety of sins and estimates it has $500-$750M in off-balance sheet liabilities. He also reckons the stock could head to zero within 36 months. What company announces its quarterly on Friday afternoon??? Anyhow, shares are down 10% pre-market...
The Rocky Agrawal article can also be found here: http://seekingalpha.com/article/470311-why-groupon-is-poised-for-collapse