July 15th, 2011 • Posted by KitKat • Permalink
Groupon's recent public filing has exposed how their business works for everyone to see. And people have been probing and prying into the details. The most outrageous thing? If Groupon's IPO doesn't work as designed, they don't even have the money to pay merchants that have already run Groupons.
Restaurants and other merchants beware! Groupon has approximately $208 million in cash but owe $290 million in accrued merchant payables. Because it can take up to 60 days to pay, they owe merchants who have already rendered their services and are waiting to be paid.
"So a company that owes $230 million more than it has, and appears to be burning through $100 million or more a quarter, is using money raised from later investors to pay back early investors? Sounds vaguely familiar. I'm not accusing Groupon of doing anything illegal or unethical. Ponzi, Enron, and Madoff all swindled their investors by misleading them about the financial health of their enterprises." Groupon is Effectively Insolvent, Conor Sen
At least Groupon is exposing what they are in the public filing and in the way they treat merchants.
Meanwhile, as the Wall Street Journal writes, the number of active daily deal sites are increasing to get in on the action. That means the daily deal supply is saturating larger cities with triple the offers 2 years ago.
