Groupon’s Stock Price Yo-yo

Groupon's Stock Price As of Dec 9 2001
Groupon’s Stock Price As of Dec 9 2001 – Source Bloomberg

One -hopefully last- post about Groupon‘s stock price (GRPN), for the sake of completion. Groupon’s stock price has been going up and down (max $31, min $15) like a yo-yo since the stock’s November 2011 IPO. It is now back up to above its $20 issuing price.

Most analysts are skeptical or downright negative about Groupon’s financial fundamentals. I am. GRPN has assets such as its popular brand name and its significant lead over LivingSocial, its Nr 2. But Groupon hasn’t yet built the sustainable money-making machine that would justify its current price/sales ratio — more details in previous posts below.

But who cares about fundamentals? GRPN’s stock price is not determined by the company’s financial fundamentals but rather by investors’ anticipation of their fellow investors’ behaviour and by issuing conditions — such as a very low float of less than 5% of the stock which also largely explains the large current variations.

In some sense, GRPN is not much different from Western governments: raising and spending money like there is no tomorrow.  Let’s hope that at some point they can turn (around) into some serious, financially sound business!

Groupon’s IPO Stock Price

As Groupon’s IPO nears its debut on November 4th, the company is rumored to want to increase its stock issuing price due to the positive reception of its IPO roadshow. Some call this “not leaving money on the table”.

It would be a risky game for the company to raise its price in this already highly speculative and risky IPO. Groupon needs the cash. Investors need to see a high upside. VCs need liquidity. Nobody wants to see an IPO that flops, and even less so Groupon collapse, as argued by Rocky Agrawal in Venturebeat.

Groupon’s IPO stock price could at first rise well above the current asking price of $16-$18 as a result of the well orchestrated speculative rally. Past the IPO fever of the first day(s), many smart investors will take their profit and the price will fall to the lower levels more closely related to the company’s financial outlook – as happened in most recent IPOs.

By raising its price, Groupon could chill investors and prevent the rally.

There are major flaws in Groupon’s fundamentals : 1) growth slowdown, 2) commission erosion, 3) short-term liabilities, 4) diminishing revenue per subscriber, 5) questionable operating efficiency, 6) questionable management ability to lead a quoted company. This issues are not addressed in the rosy picture painted by the company’s roadshow. According to these fundamentals, Groupon does not command the price it is currently asking for, and even less so a higher price.

But Groupon could be one of many stock prices decorrelated from their companies’ fundamentals.

These issues are discussed in the remaining of this post which updates and expands on a detailed analysis I published in June under the title Groupon Bashing Unleashed

Read more

Tribute To John McCarthy

 

John McCarthy Stanford 2006
John McCarthy Stanford 2006 Picture from Wikipedia

John McCarthy, often dubbed the “father of artificial intelligence” (AI), passed away on October 24th 2011. He was a scientist of genius whose work is now bearing fruit, among others, in cloud computing, knowledge management and natural language processing. May he rest in peace.

Not much connection with eCommerce? Well, stay with me as I’d like to pay a small tribute to a great man and share a few insights I draw from his life and work… Read more

Kindle Fire: 1st Mobile Shopping Device

 

Kindle Fire
Kindle Fire by Amazon

Analysts are upping their forecasts for Amazon Kindle Fire’s US sales to 5 million before year end. Departing from its first e-book incarnations, the Kindle Fire is a full colour, touch screen tablet with a proprietary browser called Silk.

Most commentators are discussing what it will do to media distribution and the iPad.

In this post, I argue that the Kindle Fire is not an eBook, much more than a rich media tablet, probably our first real mobile shopping device

Read more

Facebook Timeline: Bigger Share of Life

Facebook's Timeline

Facebook's Timeline Displays the User's History Along a Time Line

Facebook has recently introduced a slew of new features such as the ability to subscribe to another user’s news feed without counting him or her as friend and the ability to define smart lists of close and less close friends. Thank Google + for that!

But the most important Facebook innovation, now officially released, does not owe anything to Google. It’s the new version of Facebook users’ profile called the timeline. The timeline displays along a time line the entire history of a user’s Facebook activities — posts, pictures, likes etc. — since he or she joined Facebook. It’s a great tool for users. Most importantly, it is a great marketing move from Facebook because it creates an environment where the social network can hope to get a even bigger share of life of its users.

On this post I argue that eCommerce sites should take a leaf from Facebook and launch their own customer time line… Read more

Publish or Perish

Publish or perish”, once the exclusive curse of academics, has become an imperative for all online publishers. Retailers, brand owners, bloggers, marketers and even simple Facebook users have to publish more and more content to remain visible online.

This creates a rampant inflation of spam-like, ‘optimized’ content — content designed mostly or solely for the purpose of reaching a higher position on traffic gateways’ rankings. Ranking-driven content is pervasive. It blends into all forms of digital content, from eCommerce sites to blogs and to individual Facebook pages, making it increasingly difficult to draw the line between spam, optimization and original content.

This post expands on my Content Inflation slide deck by discussing in a bit more detail the examples that show how deep content inflation runs…

Facing Content Inflation

As I was researching what I call “Content Inflation” — which in a nutshell means that, forced to publish spam-like content to increase their visibility on traffic gateways, hundreds of million of publishers create a vicious spiral of meaningless content growth — I was amazed to find how pervasive it is: it impacts blogs, traditional media, eCommerce, but also individuals’ Facebook pages, Twitter, the AppStores and even the Kindle Book Store.

I was so struck that I decided to stop publishing for a while !

But now I’ve captured some of my thinking in the slide deck below and I’m ready to participate again in the online publishing madness.

See my next post “Publish or Perish” which expands on some of the examples presented in the slide deck and a few others.

SEOmoz’s 2011 SEO ranking factors

Every year for the past 6 years SEOmoz has analysed the factors that influence the ranking of Web sites on the dominant search engines with a focus on Google.

Released on June 6, its 2011 Global Search Ranking Factors research results show — as expected in a post Panda world — the increased importance of unique content and the growing weight of Social Media Marketing in Search Engine Optimization (SEO). This does not mean that previously identified priorities of inbound links, internal linking, keyword optimization and site authority are less important but, rather, that SEO is becoming ever more complex and more demanding. Read more

Groupon bashing unleashed

Only two weeks ago, local-deal start-up Groupon was acclaimed as an unprecedented eCommerce success and its IPO was as hotly anticipated as Facebook‘s. Since then, however, Groupon’s S1-Filing disclosed a cumulated $540 million loss on a cumulated $1.4 billion Gross Transaction Value. Suddenly, all love for the eCommerce posterchild seems lost and every aspect of the business is slashed. I believe critics should have been wiser earlier and the investment bankers who hyped up Groupon are to blame.

Bertolt Brecht Picture from Bundesarchiv Source Wikipedia

Bertolt Brecht Picture from Bundesarchiv Source Wikipedia

“Do not let anybody put you on a pedestal because once people realize you’re just human, it’s you that they destroy, not the image they created”. Groupon’s CEO Andrew Mason should probably meditate this thought from German author Bertolt Brecht.

Andrew Mason and Groupon, the company he co-founded in 2008, became the talk of the town after the company raised $135 million in April 2010 and, even more so, after it raised a whopping $950 million in January this year. With over 80 million online subscribers in more than 40 countries, Groupon dominates the booming local deal market it has contributed to create. Until recently, most observers were in awe. To name but one example of the Groupon-groupies: Last August Groupon was described by Forbes as the “fastest-growing company in Web history” and “what the dot-com boom was supposed to be all about“.

Well, now it seems that Groupon is rather exactly was the dot-com bust was about: a completely inflated valuation. Since Groupon has released its S1-Filing and revealed a cumulated loss of $540 million, criticism is raining on every aspect of the business. Worse, the critics are among the most influential voices in finance and eCommerce: Bloomberg, The Street, Marketwatch, The Economist, the FT, the Wall Street Journal, thisismoney.co.uk, Huffington Post, TechCrunch and more.

Below I review the 5 most critical points why Groupon is overvalued: 1) Inflated revenue and income; 2) Lack of merchant and customer lock-in; 3) Bad deal for private IPO investors; 4) Leadership flaws; and, most importantly, 5) Lack of financial value multiplier Read more

+1 and Postrank further Google’s social strategy

On May 31st at the AllThingsD conference, Chairman Eric Schmidt publicly took responsibility for having failed to move faster with Google’s social media strategy when he was still the company’s CEO.

Two days later Google announced two social media developments: the full availability of the Google +1 button , including on WordPress ;-), and the acquisition of social media analytics company Postrank.