Andrew Mason is a brilliant dude who created an amazing idea in Groupon, totally revolutionary. It’s a shame that they’re gonna try and do an IPO with a $30 billion opening valuation, makes it impossible for someone like me to buy in with a straight face at that level.
The risk factors are well known. The one that many cite is the need to bring in new vendors at all times. My bigger concern would be competition and its effects on margins over the more intermediate term.
I have a gangsta quote at the CNBC Fast Money blog this evening and I find myself in agreement with Dennis Gartman:
“Groupon has an indefensible business model, constantly needs new vendors and zero competitive advantage to justify a $30 billion valuation,” said Joshua Brown, money manager for Fusion Analytics and author of the popular ‘Reformed Broker’ blog.
“Warren Buffett wouldn’t spit in that moat,” said Brown, referring to Warren Buffett’s famous investment advice about buying companies whose potential competitors have high barriers of entry.
That’s one of the bigger concerns for Groupon, with sites like LivingSocial (backed by Amazon), Facebook and niche players trying to take share.
“They will be buried by competition, and the restaurants and the like who ‘bought into’ the idea are now rebelling,” said Dennis Gartman of The Gartman Letter.
Sorry, Disruption Hippies, just keeping in real. Groupon will be a huge company and the early investors / employees will do very well for themselves. I’m not so sure about those who buy in at $30 bil though.