Groupon now worth less than the $6 billion Google offered.

http://money.cnn.com/2012/06/04/technology/groupon-stock-6-billion/index.htm?source=yahoo_quote

by MRonney • 14 years ago

111 41 14 years ago

money.cnn.com

wmeredith• 14 years ago

I'm pretty sure it was always worth less than that.

bunderbunder2• 14 years ago

Indeed. I'd love to see it become more common for folks to draw a clearer distinction between "worth" and "valued at".

tjic• 14 years ago

Perhaps those who "confuse" these two terms do so because they've taken an economics course and realize that there are no superior definitions of "worth" than "what someone values an item at".

http://en.wikipedia.org/wiki/Value_(economics)

CUR10US• 14 years ago

Perhaps we could draw it as the difference between "would pay" and "paid".

You can put a price on something, but until someone has paid it, it seems difficult to argue that the thing is "worth" your price... to anyone. But people routinely argue this, and others believe them.

philwelch4• 14 years ago

Anything is only worth what someone will pay for it. There's no other meaningful definition. If Google was willing to buy the whole thing for 6 billion, it was worth 6 billion. It only gets questionable when you start buying and selling shares rather than the whole thing.

baddox• 14 years ago

No, when Google offered them $6 billion, it was worth $6 billion to Google (unless Google was lying).

antr2• 14 years ago

Does anybody know if the famous Google "offer" was subject to due diligence?

I'm speculating here: I doubt that the Google corporate dev team, after looking at Groupon's books (post NDA), would of kept the $6bn price tag, and if they did it would have been subject to considerable reps & warranties.

pcopley• 14 years ago

I believe you meant "would have."

lwat• 14 years ago

Offers are ALWAYS subject to due diligence checks.

antr2• 14 years ago

the question is if Google had already done the DD

Aaronontheweb• 14 years ago

Huh, but I thought Groupon had finally had the ship turned in the right direction and was profitable?

http://www.businessinsider.com/wait-wasnt-everyone-just-sayi...

I don't understand much about investment markets, but shouldn't that raise investor confidence or is there something else going on?

thasmin• 14 years ago

Maybe they righted the ship and now everyone sees their sustainable profit is below what they thought it would be.

3am• 14 years ago

The post-IPO lockup period ended today. Insiders (private equity, founders) typically have to wait 6 months after an IPO before they can sell their shares.

In GRPN's case, you can see on http://finance.yahoo.com/q/mh?s=GRPN that 45% of their shares are held by insiders. Their sales are probably causing a temporary supply/demand imbalance.

EDIT: sorry, that was Friday (http://dealbook.nytimes.com/2012/06/01/as-lock-up-expires-gr...) but the effect of lockup expiration lasts longer than one day.

robryan• 14 years ago

You would think just about all insiders would want to cash out. I just can't see how Groupon right now would at all be the best place to have your money tied up.

Steko2• 14 years ago

I imagine Groupon is like Amazon - providing an easily copied service but having some early mover advantages. And like Amazon instead of taking profits they are investing in growth.

Like let's say Amazon with their current trends sees $600 million profit next quarter. Instead of taking that $1 billion profit they plow it into advertising and loss leading promotions until the projected profit is down to $100-150 million. This gives them bigger revenue growth, more users, etc. while still turning a modest profit which let's the execs hit their bonuses.

And just like Amazon the short term profits above all else mentality of investors doesn't get excited about this.

tomkarlo2• 14 years ago

As someone pointed out elsewhere on HN today, it's one thing to have a profitable core business, and reinvest large portions of it in growth (resulting in short-term losses.) Groupon's problem is that its core business may not be profitable at all, because it's costing them more to secure new business than they make off those customers.

veemjeem• 14 years ago

I don't think this means much anyway. If you're buying Groupon stock, you're probably going long anyway. Every company has their low points.

jasonwilk• 14 years ago

Worth noting that the Google deal had a big asterisk tied to it. Groupon was burning (and is still) through tons of money. There was a very good chance that the deal could have been turned down due to an anit-trust case or held up in court for 18+ months. Both situations would have crippled Groupon. Going public was just as big a risk as accepting the $6B, the former at least got the early shareholders a pop on their money for 4x what Google was going to pay.

I am still bullish that Groupon can become a sustainable business. They are a brand that the local commerce market recognizes, and with that they can package plenty of other services such a POS systems to diversify their income away from just deals.

philwelch4• 14 years ago

Brand value is based on reputation. At a bad enough reputation, brands are abandoned. ClearWire and USWest are good examples. If Groupon's reputation with merchants is as bad as rumored, they have no basis for expansion based on brand. They do have the sales force, but if I'm a local business and a salesman screwed me on a daily deal, I won't take his calls for a POS system either.

ChuckMcM• 14 years ago

As someone who continues to watch Groupon I find this sort of headline a bit disingenuous. It is impossible to know the state of an alternate universe, one where things are so radically different.

Looking at the shenanigans around raising a billion dollars and then giving most of that money directly to a few of the insiders, certainly suggested to me and others that Groupon turned down the $6B bid by Google not because they didn't think the company was worth it, but rather that the rules in place regarding selling the company would not have compensated those same insiders the way they wanted to be compensated. Between the payoff and the fact that most of those preferential clauses, and common vs preferred shares, vanish once the company IPOs, a simple explanation of the sequence of events was that they were a way to structure the payout.

That said, Google would have brought a tremendous chunk of value to the Groupon party. They have lots of infrastructure at scale to handle distribution, a huge inventory of businesses who advertise with them, and a world wide sales team. Given that a lot of Groupon's early issues stemmed in part from the way they compensated their sales team, it seems that Google would have had the option of basically firing everyone to reset all those relationships, and then launching with a completely different cost structure.

But we cannot know and speculation, well its fun and all but what do we learn from it?

sinzone• 14 years ago

Time to buy shares. And sell 2 years from now.

AznHisoka• 14 years ago

Sooner or later there aren't going to be any small businesses left to dupe. Weren't they sending salespeople to actual storefronts to get people to do a groupon? I imagine they are going to act more and more desperate as time goes along. This is not sustainable.

westicle• 14 years ago

At the risk of being slightly off-topic, I had a recent personal experience with a groupon clone (lets call it deals dot com dot au, or "the site" for the sake of this story) which might be of interest.

I purchased four service-based "deals" through deals the site. It eventuated that the business advertising the deals did not exist, had never existed, and was consequently unable to provide the services offered.

I was disappointed and contacted the site asking for a refund. They brusquely rebuffed my request for a refund and instead offered a "site credit" for future deals. I politely indicated that I didn't want a site credit and would prefer my money back. They insisted that their policy was to give only credits.

Fortunately I work in commercial law and could direct them to the relevant provisions of Australian consumer protection law which they were breaching. They quickly refunded my money.

Lessons:

1. These deals businesses are very reliant on doing extensive due diligence on their clients, and can easily be ripped off by an unscrupulous merchant. In my case they ate a loss of 150% on the value of deals purchased (full refund to me, 50% share to the merchant).

2. In order to minimise their losses this site was willing to break the law and outright deceive its customers about their rights. If I were more pugnacious I could have caused them some trouble. Unfortunately most of the customers they try to rip off probably aren't commercial lawyers and they get away with it.

My lasting impression: very difficult industry to turn a profit in, strong incentive to scummy business practices and the attendant legal risk those practices bring. I wouldn't invest.

pilsetnieks• 14 years ago

> very difficult industry to turn a profit in

1. The coupons usually can be redeemed for up to 6 months in these sites and the money is paid to the company only when the coupon is redeemed, so let's assume a 3 month average float time. With clever investing you could do much in 3 months. 2. As with gift cards, I assume, quite a significant percentage of those coupons are never actually redeemed.

bermanoid• 14 years ago

A = the lowest value that someone is willing to sell a share at right now, multiplied by the number of shares that exist.

B = the sum over all shares of the price that each share's owner is willing to sell it for right now.

B > A, by definition. This is why buyouts typically happen at a premium above the share price, because a flat out purchase of shares on the open market would send the price through the roof. So the buyout price is set at a level where enough people feel like they're getting a good deal to let the deal can go through without stirring up too much shit.

tl;dr market cap doesn't mean very much, and shouldn't be compared to a buyout offer, at least without some adjustment.

Groupon now worth less than the $6 billion Google offered.

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