http://online.wsj.com/article/SB10001424052970203716204577017773545604142.html?mod=WSJ_hp_LEFTTopStories

http://www.businessinsider.com/groupon-crashes-through-ipo-price-2011-11

In a recent Wall Street Journal article, “Max Wolf, chief economist at GreenCrest Capital Management LLC, which tracks companies before they go public, said Groupon, despite its flaws, shows investors are "excited about social media and social commerce but still have few ways" to make such investments. "There aren't many ways to express excitement about this space," he added.”

Think about it.  Despite every red flag that has been raised about the company’s management, the underwriter’s supposed lack of knowledge about the company’s management, the massive amount of money the CEO drained from the company’s pre-IPO money raise, the company’s SEC issues, and the company’s weak business model, Groupon’s stock sold well.  Why?  Wolf said it correctly, investors are excited about the Internet space.  Investors are looking to make a quick buck.

Here’s the big surprise for investors, Groupon is an online penny saver.  A local business can easily launch into the discount voucher business.  The company will not look so pretty long term.  Then again that is not what the stock market is about.  The stock market is about a big quick hit and run, not about long term growth or value.  Investors are looking to make a quick buck and they do not care if the company has a good long term business model.  However, the Street will use this comopany they way it did with hunrdeds of Internet and telecom based companies that went IPO in the 1990s - as a poster child for successful businesses.  Here is a bit of history; nearly everyone of those Internet and telecom based companies that started as a result of the Telecom Act of 1996 (a far reaching law that impacted the entire information industry) went bankrupt.   

The Street conned the marketplace into thinking that every company that went IPO was going to be successful.  The con was subtle; they said nothing to discourage the marketplace from thinking the massive IPO growth would go on forever or that nearly all of the business plans were flawed.  Sound familiar?  Think today's recession which I still believe is the original 2001 recession, which despite what economists say, never ended.

I understand that attitude but frankly, it is a travesty to actually think this IPO is good.  The company’s business model is built on a house of cards.

Groupon should enjoy the excitement while it lasts, which will not be long.  My advice to shareholders:  lean on the management as it relates to corporate governance.  Theoretically, the company will have to report the truth and the board and management must behave ethically.  Oh one more thing, check their numbers.

As for competitors, come on out and compete head-to head with Groupon. The secret to cratering Groupon’s revenue model lies in the numerous weaknesses that have been publicly revealed by other writers.  Sorry competitors, I am going to make you work for this one but do not worry there are dozens upon dozens of how-to-articles aout there.

Overall, Groupon's IPO is an example of a lack of accountability for full disclosure and a lack of integrity.

Groupon's stock has crashed below the IPO price because investors are asking all of the tough questions that need to be asked.  Groupon is an online pennysaver that is hurting small businesses and in the end not really offering real value.  Groupon should find out how the old fashioned penny savers made money.