http://www.reuters.com/article/2011/11/03/us-groupon-pricing-idUSTRE7A16Y720111103

http://online.wsj.com/article/SB10001424052970203716204577014302001204154.html?mod=WSJ_Tech_LEFTTopNews

I just love the biased mainstream media.  One moment, Groupon is the media darling of the media.  I even fell for the company’s pitch. Then folks like myself started looking closely at the business model.  The next moment every piece of bad news you can imagine comes out about Groupon.  Information that Goldman Sachs should have known about from the beginning is revealed by diligent reporters.  Now suddenly because a handful of institutions stand to make billions of dollars, suddenly all of the RED FLAGS are forgotten.

My concern is that suddenly analysts are treating the IPO as a good thing.  Why?  One moment everyone is questioning the wisdom of going public and then suddenly poof all is forgotten.  One Wall Street Journal article recently called Groupon’s recent IPO roadshow as “Groupon pixiedust” and ”Groupon therapy”.  The recent Wall Street Journal article was referring to the IPO plans for OpenTable and ReachLocal going bust.

One moment the Wall Street Journal has opened its eyes about the unrealistic expectations for the Groupon IPO and suddenly the company is being treated as if it has magical powers.  Talk about biased.

Groupon’s analysts and underwriters are touting their plans about shooting for a $12B valuation.  Who in the world are they trying to con?

The red flags I had mentioned include:

• Accounting gaffes – Thank goodness the SEC caught them.
• Disclosure gaffes that included a showing a founder that was lawsuit prone and a somehow the financial advisor and the company forgot to mention that its founder and its early investors took home $810M out of $950M raised in a pre-IPO round.  By the way the founder, Eric Lefkofsky, pocketed $319M of the raise.
• Goldman Sachs admitted to not seeing any of the red flags.  Of course the admission came after a reporter caught them.

It is an issue of integrity.  If you are willing to hide, lie or mislead investors to jack up the value of the company, then who knows what else you are capable of doing.

Groupon’s IPO is a sham.  The Groupon model is not sustainable unless it gives back a greater portion of the voucher’s value to the retail business.  The model has a low barrier to entry.  A local business can print its own coupons and distribute them while standing in front of a local grocery store and get the same result.  So where is the value in going public other than the financial advisors and the founders pocketing your money?

Since I wrote this position piece, Groupon has launched its IPO.  Goldman Sachs is claimign victory.  The tragedy is that all of the red flags were swept under the rug.  You wonder why folks are protesting against Wall Street?  I am not.