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Crazy U.S. economy: Groupon

So there’s Groupon as a new U.S. stock market player. The revenues flooded
700 million dollars into Groupon’s stash. Lots of money to play with and also
lots of investors that now rely on them to do something good with the money.
But why am I so sceptic about Groupon’s latest big deal? Get a load of this…

How good economy should basically work:

  1. You start off with a small company.
  2. You try to increase your business and gather profit.
  3. You expand and invest your profit only!
  4. you try to keep this pace until you’re big enough to go stock.
  5. You partly share your profit with the shareholders.

Okay, that’s rather simplified now because there are many factors that would let this list explode. But that’s just the basic definition of a successful business as it was in the past and as it should be nowadays.

So let’s have a short peek at Groupon and what it does:

Groupon is a sales promotion reseller who brings reduced offers to customers. The condition for the rebate is that a certain number of customers must buy on that issued coupon. Then Groupon pays a part of the issued offer on the issuing company. Usually according to some sources it is 50% that Groupon is holding back of the total coupon cost.

A closer look on the business model:
The company offers one “Groupon” (a word composition of group and coupon) each day in each of the markets it operates in. The Groupon works as an assurance contract: If a certain number of buyers sign up for the offer, then the deal becomes available to the public, if the predetermined minimum is not met, no one gets the deal that day. This reduces risk for retailers, who can treat the coupons as quantity discounts as well as sales promotion tools.
Groupon makes money by keeping approximately half the money the customer pays for the coupon. So, for example, a dinner for 60 dollars could be purchased by the consumer for 30 dollars and then Groupon and the retailer would split the 30 dollars of the deal (if the tageted number of buyers has been reached). In conclusion, the retailer offers a dinner valued at 60 dollars and gets approximately 15 dollars from Groupon for it. And the consumer gets the dinner from the retailer for which they have paid $30 to Groupon.
Groupon excludes it’s service to businesses like shooting ranges, abortion clinics and sex clubs.
Not being the same as categorized advertising, the business owner does not pay any upfront cost to participate, Groupon collects personal information from participating consumers and then contacts only this destinated group by daily email, who may possibly be interested in a certain similar product.
Groupon itself selects its business partners by initially checking on outstanding businesses thru research teams that “spy” on them. If Groupon finds them suitable for their business, the outstanding business is then contacted by the sales department of Groupon and the business idea of Grupon is explained to them.

Sounds familiar, right? – Yep, there was something like it in the past, called Letsbuyit. Same business model, same idea! Yet Groupon had the idea to refine it more and expand extremely fast and by outwitting their competitors!

Okay, sounds good so far, what’s the catch then?

Having a look at the figures for stock market appliance:

(the income sheet looks bad for 2011)

(stockholders seem not to get a dime for their shares in 2011)

So what you see is, that Groupon had done a 930 million payout to employees and earlier investors. How have they done that? According to the figures, they didn’t have that much money to do so…

Well, that’s why Groupon has done two more refinancing actions to flood in another 946 million dollars in order to solve the old loads. of this huge sum, only 136 million dollars were held back in the company. Interesting though to see that with this action, managers of Groupon have so much money now that they don’t seem to give a f**k on the totally deficit company.

The cumulated revenue for Q1 2011 is at approx. 645 million dollars, costs for the revenue were 374 million dollars. Funny to see in the figures that the gross revenue minus the revenue costs give a straight 270 million gross profit(!) – To me it seems as someone has beautified the figures to please the shareholders eyes.

Okay, now we come to the net profit when the operational costs are added:

So we have 270 million dollars to play with after all expenses, right? Yeah! The costs for operation yet are rated at 387 million dollars! So let’s add the two numbers and (surprise, surprise!) the net profit turns into a desastrous loss hereby! The be exact: 117 million dollars! When adding all other administrative costs that result out of these figures, the total loss to the shareholders is a tremendous 146 million dollars. so each share drives in a loss of approx 1 dollar: No money, no dough, honey! I still wonder that there are so much stockholders that mpumped now 750 million dollars into this abnormal deficit business!

If you sum up the income loss to the whole year, it’ll result into a operational loss of about 468 million dollars for 2011. (by the way, the operational loss of 2010 was 420 million dollars – just to be mentionned aside!)

At this rate, Groupon’s new play money of 750 million dollars will last for about 18 months! But I think, stockholders may sell the paper earlier before it’s too late. Or Groupon is finally turning the tide at 180 degrees and tring to operate in profit again. But the future looks grim to me. On the one hand I am sorry for the stockholders who fell for that sort of economy bubble that is about to burst! On the other hand I have no mercy for such money-grabby speculators whose only work is to increase their money stack by gambling on the stock market! In secret I say to me: Serves them right!

I am spiteful and envious, you say? Partly yes because with so much money I’d have better plans then to p**s it away on stock markets. And on the other hand I can proudly say that I work hard for my money I earn so far. It’s only a fraction of what stockholders earn but on the one hand I am not under so much strss that I have to look each second on my stock and on the other hand I have time to live and enjoy even the smallest purchase that I’ve accomplished by work thru my bare hands and my mind!

The only thing I can hear out of it:


Another business bubble has burst!

November 4, 2011 Netspark - 1588 posts - Member since: May 9th, 2011 No Comments »

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