[Quizzy]

They should have unloaded this fraud on Google when there was a $6 billion cash offer sitting on the table (assuming that was true).

The fact that Google even offered that much leads me to believe that they have jumped the shark with that offer.

Anybody who knows anything about retail would have studied the business model and realized that this was not sustainable. Obvious red flags: 1. Heavy reliance on field sales (the largest expense), which is NOT scalable 2. Exclusive reliance on repeat sales as the key driver of sustainability: this being the obvious case, did Google not do its due diligence and actually surveyed past Groupon customers? Such a siimple survey would have easily revealed the issues of this "local deals" model. 3. Heavy reliance on "small business" owners as the driver of revenue. This is a sensitive and fickle market, where even slight movements in the general economy will cause huge moves in spending patterns.

These 3 points were readily available to anybody with some insight into this segment; Google with all its money must be surrounded by "yes" men, nothing else could explain it's willingness to part with $6 billion so quickly.

[nakor]

I'm not sure if they actually could have sold the company to google even if they wanted to. My understanding is that you must open your books to the prospective buyer after a certain stage and it is likely that once the google accountants had a look at Groupons books the deal would have fallen through.

That could have created negative press and damaged their pump-and-dump strategy for the IPO.

[Quizzy]

Excellent point.

[byrneseyeview]

Why should they have sold for $6 billion? They're worth $9.6 billion today.

Groupon is not a bet on the coupons business--that doesn't justify the current valuation. Groupon is a bet that if you can reinvent the Yellow Pages, at scale and online, you can make a ridiculous amount of money. It's probably one of the largest companies around with such a high probability of failure, but their value if they end up being the winner in local is just staggering.

[tucson]

Assuming Google was ok for the deal they could have sold 100% of the company against cash or maybe Google stocks. Instead they sold I think only 5% during the IPO. Right now the CEO cannot sell more of his shares until May 2012 (http://ipo.nasdaq.com/Fundamentals.asp?cikid=826818&fnid...).

[byrneseyeview]

May 2012 $15.00 puts are $2.10/share, so at the current market price the insiders are still ahead. They may put a premium on diversification, but they also sold stock before the IPO.