Why Groupon is poised for collapse(blog.agrawals.org)
blog.agrawals.org
Why Groupon is poised for collapse
http://blog.agrawals.org/2012/03/31/why-groupon-is-poised-for-collapse-an-update/
2 comments
I'm calling "shannigan!" No u.s. receivables factoring business has gross margins that they've got. What is Groupon - short-term loan sharks?
Their reversal of NWC as they slow down their quarter-over-quarter growth and overall impact to cash flows is what every smart hedge fund analyst was pointing out for the past 2 quarters that underwriters like GS, BAML, MS and others were neglecting to put in their 100 page initiation coverage reports... BUT for most hedge fund PM's they could not figure out a way to short the stock because the company only floated like 5% of shares so the last time I checked, cost of borrowing to short the stock was ~45% per year.
I mean for starters, Mason and mgmt. already dumped a ton of their shares. Why would they dump so much of their shares ahead of the IPO? He knew that IPOs usually have 6-9month lockup period where management can't sell their shares and it was a race against time for people to figure out their core business model.
Their reversal of NWC as they slow down their quarter-over-quarter growth and overall impact to cash flows is what every smart hedge fund analyst was pointing out for the past 2 quarters that underwriters like GS, BAML, MS and others were neglecting to put in their 100 page initiation coverage reports... BUT for most hedge fund PM's they could not figure out a way to short the stock because the company only floated like 5% of shares so the last time I checked, cost of borrowing to short the stock was ~45% per year.
I mean for starters, Mason and mgmt. already dumped a ton of their shares. Why would they dump so much of their shares ahead of the IPO? He knew that IPOs usually have 6-9month lockup period where management can't sell their shares and it was a race against time for people to figure out their core business model.
Groupon has billions of dollars of value still left but yeah, market cap at this price is still way too high. Deal fatigue takes time to hit for majority of users and the barriers to entry (currently - having the immediate ability to reach out to hundreds of thousands of local users) are too low (I can't do it but google and others can).
However, I find huge SaaS value in their latest move of introducing the bookability concept. I think under the right platform and execution, it should result in a more winner-takes-all business model with sustainable/repeatable revenue streams.
But on the other hand, I'm still unconvinced of the ROI for most vendors and their NEED for recurring Groupon offers. I believe, in the end, the entire system (whether local restaurants or spas or whatever) is worse off as dollars leave the system and go to the hands of consumers and Groupon. Nevertheless, the concept of Groupon can't be undone; it's just a matter of how much smaller piece of the pie Groupon will get and whether that pie size will shrink in the near future.
However, I find huge SaaS value in their latest move of introducing the bookability concept. I think under the right platform and execution, it should result in a more winner-takes-all business model with sustainable/repeatable revenue streams.
But on the other hand, I'm still unconvinced of the ROI for most vendors and their NEED for recurring Groupon offers. I believe, in the end, the entire system (whether local restaurants or spas or whatever) is worse off as dollars leave the system and go to the hands of consumers and Groupon. Nevertheless, the concept of Groupon can't be undone; it's just a matter of how much smaller piece of the pie Groupon will get and whether that pie size will shrink in the near future.
"Well, for starters, it’s not a coupon company nor a marketing company. At its core, Groupon’s U.S. business is a receivables factoring business, as I wrote last year. They give loans to small businesses at a very steep rate (the price of the discount plus Groupon’s commission). They get the money to fund these loans from credit card companies such as Chase Paymentech. Groupon is essentially a sub-prime lender that does zero risk assessment."