Groupon’s Worth Less Than What Google Offered in 2010By: Shawn Hess - June 5, 2012
Groupon had their opportunity back in 2010. Google offered to buy their company for a whopping $6 billion, but they decided to fight the good fight and go public.
The bad news for Groupon and their investors is that shares have never been worth what they sold for in the IPO and yesterday, Groupon fell below the $6 billion market cap that would have made that Google offer a seemingly better deal.
Currently shares of the company are trading at around $9, which is the lowest they have ever gone. As you might already know, Groupon’s IPO lockup period just ended and they may explain some of the trading, but it certainly doesn’t account for the near 27% tumble in value. Market capitalization is at about $5.8 billion as things stand right now.
Of course, one cannot overlook the company the shares keep with the Facebook IPO so closely synchronized with the end of the Groupon IPO lockup period. Facebook crashed from their $38 per share target price down to $27 in just a few weeks of trading.
This monumentally terrible performance has surely had an adverse effect on investor’s willingness to buy into internet-based stocks. In fact, Facebook’s IPO has probably turned more small investors off the market that any other in recent history, and with good reason. Shady dealings seem to be the new standard when it comes to internet IPOs.
Obviously I’m referring to Morgan Stanley’s selective distribution of a revised earnings forecast that conveniently never reached small investors despite being available almost ten days before the much anticipated Facebook IPO. It screwed small investors big time. Groupon has some of the same non-sense going on with their financials. After all, their first financial earnings report had to be revised because it was found to be completely inaccurate.
More interesting news from the wonderfully deceptive world of Groupon comes from their most recent earnings report, which is the first under the guidance of new financial leadership, and features some unexpected revenues accompanied by a strange spike in trading prices.
Once again, a closer examination of Groupon’s quarterly financials revealed cash listed as an asset that could just as easily be a liability if things don’t continue on as projected. I would say crashing stock prices and an investigation by the Financial Industry Regulatory Authority (FINRA) constitutes things not going as planned.
But to be perfectly fair, Groupon’s CEO, Andrew Mason did advise his shareholders that Groupon was going to be doing some pretty radical things in order to grow the company and that they should hold on for a bumpy ride.
Andrew Mason, Groupon CEO, comments on Groupon’s road to success in a letter to stockholders:
“I warned investors of a bumpy road—an unfortunate side effect of our unprecedented growth. Groupon has scaled to more than 11,000 employees and 48 countries in only three-and-a-half years. Why move so fast? We believe that Groupon is standing before an enormous opportunity, one that hundreds of competitors large and small have seen. Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow.”
Check back regularly for more updates on Groupon and Facebook. It seems internet IPOs and stocks are the best scandals going right now. Maybe they are good investments, there’s always plenty of interesting news coming out of them.