“Gather round, dear investors, and hear all about
The worst IPO that has ever come out”

Yesterday I dissected the three main reasons why people lost money in Groupon ($GRPN) here on the site.  I do this because I think it is more helpful to investors than 99% of the “content” being published and because in the writing, I am able to clarify my own thoughts and discover what it is that I actually believe right alongside the reader. 

I got a bit of criticism for coming off as a bit of a Monday morning quarterback re: GRPN so I thought I’d dust off this lost classic from last October, published on the eve of Groupon’s IPO.  Yes, I have begun pompously referring to my own posts as “lost classics,” what do you want from me? – JB


Groupoem (or an IPO for the ages)

Gather round, dear investors, and hear all about
The worst IPO that has ever come out
It’s hitting this week if the stars align right
But only the foolish would look for a bite

For Groupon is now past the peak of its glory
Its promising start a well-known story
Of youthful intensity, vision and zeal
Of crafting the perfect consumer-led deal

City by city, Groupon grew like a weed
Positioned as marketing for the small biz in need
Coupons for shoes and coupons for socks
Offers for Lasik and half-off on Crocs

Then Google came calling, six bil on the table
But Groupon bought into their very own fable
The emails would issue from CEO Mason
“Hang on tight,” Andrew said, “our competitors are chasin'”

So onward and upward the company went
Taking in money that it promptly spent
The trick was to pay merchants sixty days late
Which gave Groupon money and time to inflate

The accountants concluded the scheme was impaired
Sure they were grumpy – but they also were scared
“A ponzi,” they called it, “it can’t be sustained!”
“If they run out of room to expand they’ll be drained!”

And one other headwind we also should mention
The social offers crown is still in contention
Both Amazon and Google desire to play
Good luck keeping those two rottweilers at bay

The first IPO filing was put back on the shelf
A value of thirty billion soon became twelve
And as Groupon embarked on its period of quiet
A leaked memo from Mason created a riot

The regulators didn’t find any of this funny
The rules get much stricter when you’re trying to raise money
Poor Andrew was learning a lesson for sure
Being boyish and charming wouldn’t help him no more

So with shady accounting and rivals galore
Groupon now brings its stock to the floor
Sixteen to eighteen per share is the word
With a float so constrained it’s completely absurd

Less than five percent of Groupon shares will go pub
An insulting debut, why that’s barely a stub!
They’ll create quite a show with this scarcity bait
The intentions are clear, to manipulate

By producing a noteworthy opening pop
The underwriters get to market their shop
So Facebook and others will watch and learn
Which bankers to hire when it’s finally their turn

In the meantime the VCs in Groupon are thrilled
Their exit is coming, the champagne is chilled
A too-close encounter with death is postponed
While retail investors line up to get boned

The next Demand Media or LinkedIn perhaps
And look how it fell right into their laps!
They’ll buy that first day as up-stocks attract cash
While the insiders prepare to make their last dash

Mason will get his chance to be boss
At a big public company, come profit or loss
And all will be well on The Street named Wall
As the bankers await Mr. Zuckerberg’s call

– Downtown Josh Brown, October 30th 2011

Read Also:

The Netflix and the Blockbuster by Lewis Carroll (TRB)




Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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