Minyanville’s Cono Sen writes: Investors beware -- the company owes $230 million more than it has, appears to be burning through $100 million or more a quarter, and is using money raised from later investors to pay back early investors.
I'll start by tipping my hat to Andrew Mason. He caught social mood just right, creating a coupon/local/flashmob hybrid business model at the perfect time, and has created the fastest-growing company on a revenue basis in American history. That being said, it's operating like a Ponzi scheme that needs constant infusions of cash to stay afloat as it's hemorrhaging money.
We'll start by looking at the balance sheet, which is typically a waste of time for hypergrowth companies. However, for Groupon there are all kinds of red flags. They have $290 million in current assets ($208 million in cash) and $520 million in current liabilities -- current assets minus current liabilities puts them $230 million in the hole. This wouldn't be a problem except for the fact that they're wildly unprofitable, which we'll get to in a moment. Another concerning part of their current liabilities is that $290 million of it is "accrued merchant payables" -- in the US they take up to 60 days to repay merchants. So that $290 million is merchants who have rendered services waiting to get repaid by Groupon. Not exactly the best merchant experience. Oh, and by comparison, LinkedIn (LNKD) has current assets well in excess of current liabilities, and isn't losing money.
The income statement is even worse…..
Read the rest of this sad, sad story at: http://www.minyanville.com/businessmarkets/articles/groupon-groupon-ipo-tech-stocks-linked/6/3/2011/id/34936
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