Be wary of Groupon
This IPO is just a repeat of the previous dot-com era, when so many investors lost so much money.
So Groupon's (GRPN) initial public offering is being priced at $20 per share? That's what it's going to do? That's the game it's going to play?
We saw the same kinds of walk-ups from the low teens to the high back in 1999. Saw it with TheStreet (TST). Go read about it in "Confessions of a Street Addict," in which I exposed this ridiculous practice.
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Except this time, it is worse. The bankers are juicing this one like you wouldn't believe, with only 5% of the float being sold -- half of what the other dot-coms of this era offered.
So forget the fact that Groupon has a ton of competition, now and in the future. Ignore that it cut spending to show more profitability but said it could ratchet it back up after the deal is completed. Ignore the repeated bizarre methods of accounting that the company has used for its financials. And forget that insiders, who aren't selling on the deal, have been selling all along.
What's happening here is nothing short of the worst kind of repetition of a previous era when so many lost so much money and never came back.
I predict that Groupon could be very much like CBS MarketWatch, the deal that launched hundreds of dot-coms with its opening a fivefold increase from the pricing.
That's right. You heard me.
I think Groupon could repeat that travesty, and no one, certainly not the Securities and Exchange Commission, is flagging this. All the SEC cares about is disclosure, not manipulation to cause a pop, which is what's happening here.
So go get as much as you can. The stock jumped nearly 50% in its debut Friday.
But figuratively, here's your hat, what's your hurry, and don't let the Groupon door hit you on the way out this afternoon, which I suspect could be about the high point of Groupon's trading.
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Cramer is right... don't let a bunch of money manipulators market an IPO. My grandparents are watching TV saying "look at that new Groupon company, that's some pretty cool stuff lets buy shares... my Grandson would be so happy to know we are investing in the future of American technology". Technology my a$$, making money from nothing for some fortunate few will not take this country anywhere. You may think there is something illegal about this... nah, taking money from the ignorant has never been illegal. All this means is executives were in cahoots with their VC's, building a brand and marketing reputation while seemingly risking little in the process by pocketing most of injected cash and showing amazing trajectories for revenue and cash flow. Their targeting the 99% while the 1% is watching with a grin on their faces because its reassuring to know how we got here... a little brains, research and one golden rule.
"There is no easy money!"
All you guys that are saying "Hey Groupon is amazing for me, it gives me 50% off my burger at the corner Deli... Americans are saving money!". Wake up, most of Groupon's deals are discounting local mom and pops to a negative margin just so they can compete with large conglomerates, and hope to get repeat business. The idea is great, but your just trading money around... there is no growth in that... there is no IP in that, you cant sell that to other countries.
Look at startup's that actually create something... ones built with integrity, conservative means and a long term strategy. The best I can hope for in Groupon's scenario is that a few good Computer Engineers make millions on this IPO and go make some startup's of their own worth a damn.
Let's not forget that Google offered to by Groupon for $6 billion and Groupon turned them down. That should tell you something about the decisions that Groupon management will make after the IPO.
I was thinking of starting my own competing coupon website. Let's see. That should cost me all of $20 to start. The barriers to entry for Groupon competition are incredibly small. Groupon will probably be known as GroupPoopOn within a year or two, if you can remember it's name at all by then. Hey, Groupon employees: Get ready to head back to your old job at the mall selling cell phones.
People that buy IPO's are not investors. They are speculators. Greed is a funny thing. So many people are mad because they made bad decisions. But instead of learning the simple financial lessons, they blame others and then keep making the same mistakes.
If you avoid IPOs' and focus on established business's do you miss out on the big run-ups? Yeah. And the collapses too. Cause let's be real. Only a small number of companies that go public survive. and do you really think an ipo is going to be 'undervalued'? Seriously, it is priced at the MAXIMUM amount that they can 'kinda-sorta' justify. And you are willing to pay more? Whatever.
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