Groupon is hitting the streets this week on their IPO road show, so the timing on this video couldn't be better. I wouldn't call myself a Groupon hater, but I'm definitely a Groupon skeptic. So you can imagine my surprise when I heard fellow skeptic (and pretty much the smartest guy in the room when it comes to tech and Web 2.0 offerings) Paul Kedrosky predicting that Groupon might shoot up 50% in the first week after the IPO. What do you guys think, is he right? Would any of you own this stock long term?
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Based on current information, no value investor should buy this stock. As you likely know, IPOs can do amazing things in their first days, despite the business, or lack thereof, that underlie them. It's almost always form over substance. As Benjamin Graham would tell you, be more than skeptical if you are actually considering buying into the IPO. Sure, Groupon could go up 50% in the first day- that wouldn't even be a record. At present, Groupon is a money-losing operation- in fact, the company has NEVER made a net profit. The presumption, of course, is that at some unspecified future date, the company will make money. But why would a value investor pay a premium for what amounts to prophecy? If anything, there should be a huge discount considering you are currently paying for a money-losing venture. Long gone are the days where a company went public after it proved its viability, fiscal and otherwise. Even trading the IPO would be difficult. Unless you are an IPO insider, don't give your money to the investment banks by trying to beat them at the game they designed, referee, and control.
I see so many imitators out there. Businesses have cheaper alternatives to turn to if they want to market themselves to new customers.
When someone visits a Groupon or similar site, they don't have an account or network of people that keep them coming back for more. Facebook and Linkedin have strong user bases which makes it harder for an imitator to come along and quickly take over the market.
In 5 years this dude will wish he had taken the 5 billion from google - unless he has another idea that is going to make his business unique and sustainable.
The stock will just after IPO. But, it will come back down. Like others have mentioned, the business has low barriers of entry and others will continue to copy them. Because of the low barriers to entry and competition Groupon has been spending way to much on customer acquisition. Although they mentioned somewhere that they are going to reduce it, I think their revenue will go down with the reduction.
They are not a long-term buy at all. If you have an in, they could be good for a quick buck on the IPO jump. But other than that, not a buy.
I'm of the opinion groupon is the make or break point for the current tech bubble. If groupon IPO fails miserably, I can see alot of bubbles bursting very soon.
Groupon will fail eventually. It's a matter of "when", not a matter of "if". If your fundamental business model is to sell other people's stuff for half off, you're only going to be in business for as long as there is the next sucker.
Not sure this is going to get the biggest pop. Groupon has an unusual number of hedge fund investors that came in on private rounds and are probably itching to get out
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