Groupon is going to be a very interesting company to watch in addition to the other social network/media companies I will be tracking. But, Groupon has already provided ample evidence of the scams and legal fraud enabled by the corrupt Initial Public Offering (IPO) process. The behaviors of Groupon’s insiders are truly despicable and highlight how broken and corrupt our economic construct has become. Our economic construct has evolved from a means to fund and fuel companies to employ people with fair wages and salaries and to provide the citizens with products and services at a reasonable price; to a system that is exploited to make those on the inside or at the top über rich at the expense of the company, the employees, and the public. The fact that Groupon’s scam can unfold without sackings, convictions and criminal sentences reveals how inept, corrupt, and incompetent our government has become.
Groupon does offer an interesting business proposition that makes sense, but the insiders focused on their own bank accounts assure that this enterprise will not be a long-term entity or a Google, Amazon, or Expedia. Groupon’s business model basically generates group purchasing power for its subscribers resulting in discounts. Groupon makes an offer and if enough subscribers hit the yes button the deal is on. Philosophically, the idea is repulsive to me, but in the end, the goal of all businesses is to influence hoards of people to behave in a uniform manner to slaughter the cows. The Groupon insiders aren’t interested in the longevity of the business, rather they are interested in the amount of money they can suck into their own bank accounts.
Groupon is one of the fastest growing companies in U.S. history, yet the owners funneled the majority of their start-up or venture capital (seed money) into their own bank accounts. Groupon raised over $1.1 billion in private funds, but 85% of those funds went into the bank accounts of the insiders BEFORE THE INITIAL PUBLIC OFFERING. In fact, prior to the IPO articles circulated about the dangers of the firm running out of cash Running out of Cash!. Are you kidding me? These insiders (key players include Andrew Mason, Eric P. Lefkofsky, Bradley A. Keywell) decided to take the company’s money for themselves risking the solvency of the enterprise, the jobs of employees, and the “service” provided to its subscribers and business partners (merchants)?Insider steal seed money People, this is a crime in and of itself! How can the laws created by our government legalize such behavior? In essence, the insiders stole over $900 million bucks from “the team” and placed the funds in their own bank accounts. Insiders Already Rich But the criminal behavior and fraud has only begun.
Groupon went public on November 4th, 2011, offering the public 35 million shares at a price of $20 dollars per share. The proceeds to “the company” were therefore at a maximum $700 million bucks, but after underwriting and other fees most likely less than that amount. Notice that this $700 million is less than the $900 million the insiders already stole from the firm prior to the IPO! But the scam continues. Groupon only issued 5% of its “private” shares to the public. This is one of the lowest floats (percent of shares offered to the public versus total shares) on record. As a result of the media hype and limited shares, the stock price on the initial day of trading shot up as high as $31.14 but ended the day at $26.11. This ending price represented a 31% gain off the initial offering price. It is important to note this was the second largest U.S. internet-based IPO since Google back in 2004, but is it justified?Did Investors get a Deal or a Dud?
Groupon’s market cap or firm value was worth $16.65 billion at the end of its first day on the public market. That market value is higher than Nordstrom valued at approximately $12 billion. The stock price today is $17.84 per share with a market value of just $11.4 billion. How does a company lose $7 billion in value over a few months when the media keeps implying the economy is on the up and up? Because the IPO process with these social networking / media companies is a bunch of hot air. Don’t you see that this hyped up IPO process was used to reimburse Groupon “the company” for the $900 million the insiders stole and put in their bank accounts? The only problem is that the IPO raised at least $200 million less than the insiders stole!
But the largest piece of the scam and Ponzi scheme is yet to unfold. Remember the insiders only floated 5% of the private stock! The insiders still hold 600 million “private” shares. I guarantee you that Groupon’s price will rise during the Facebook and Twitter IPO’s and the insiders will be selling their shares like crack dealers. Keep in mind that Google offered to buy Groupon for $6 billion dollars. The insiders said no thank you. Why? Because they knew they could trick the public into believing their company was worth more. And so far, they have been correct. These inside crooks are going to become billionaires at the expense of the public investor and the company’s employees, customers, and business partners (the merchants). And the SEC and our government leaders will stand by like a bunch of limp rods watching it happen. But I will be quietly monitoring and recording these crooks sell their inside shares and that information will always be available to those who understand the cost such a scam and Ponzi scheme is costing our average citizens. Here is a good article that gives the background of Groupon and its founders / culture. Groupon History