It's worth noting that many new-ish companies can swing +/- 20% after quarterly earnings. Even bigger companies like Amazon and Google can swing up or down wildly. Sometimes they return to their original prices in a matter of days, sometimes not.
Anyway I don't want to make a judgement call on Groupon here, I just want to mention that this sort of thing is somewhat common and one earnings call (and stock price drop) alone doesn't spell death for the company. I'd be more worried if it was a gradual but consistent 27% decline than a day-after-earnings 27% decline.
This is a good sign that we aren't in another tech bubble - the market is correctly pricing poor performers on their base metrics rather than speculation and hype.
Or that we were (note: past tense) in a bubble, but that bubble consisted of a handful of companies and only affected a small number of investors/VCs. This was a common theme in the HN threads on SV bubble speculation, and ultimately I think that's what turned out to be the case.
I definitely agree that in the long run, this is a good thing. It sheds some of the hype and gets people focusing on the fundamentals.
The problem with bubbles is the expectations they lead to, and the broken expectations they leave behind.
In this case, we may well have seen more of an expectations (and pre-IPO investment) bubble than an IPO/investment bubble. The angels, incubators, and VCs are burnt. But also founders and early hires latching onto social, advertising, gaming, and SEO start-ups who're finding that reality isn't matching the pitch.
Even solid ideas are going to find capital harder to come by if a bigger chill hits.
Of course, that's what everyone was saying in the fall of 2008 with "RIP Good Times". And while the recent boomlet hasn't been huge, it also wasn't quite the four horsemen of the apocalypse either.
http://www.slideshare.net/eldon/sequoia-capital-on-startups-...
I'm still rather dismayed that so many startups are so inconsequential, and are largely aimed at value extraction, capturing more wealth than they create, rather than value creation, creating a greater societal benefit and capturing a smaller (but sufficient) share of this.
Perhaps what's needed to establish rational expectations about tech companies is another success from value-creation. Then again, there are a few lately that fit that criteria - Dropbox, GitHub being big examples of that.
I think this distinction will serve everyone better - founders, employees, angels, VCs and the tech community in general.
AirBnB (despite some serious issues with the concept). A few others.
The usual suspects gathering most or all of the headlines, and flooding my voicemail and inbox with, frankly exceptionally unappealing pitches, really leave me cold.
Hmmmm, the last bubble deflated in a similar way... despite some big bangs it never really 'popped' all at once. Instead there was a prolonged period of slowly deflating companies (all of 2001 really, yet the decline started in May 2000), with investors scrambling to reduce the burn rates and companies slowly running out of money and/or fools to invest in later rounds.
I was in the VC biz back then. Traveled the world to save what was left, sell what we could, hoping against hope that it was just a temporary slump. Ultimately we failed miserably. Lost my shirt and my life savings, so it's safe to say I wasn't a very good (prescient) investor... (I blame my nerd-core)
Note: there is one big difference with the last bubble: some of these companies actually make serious money, whereas at the time this often wasn't the case, but I feel that's merely a function of the role of the internet in our present-day lives. The crazy P/E ratios from back then still exist. FB, GRPN, ZNGA et al. are hopelessly overvalued.
Some companies made it out of the 2001 era very strongly, though most didn't. The main difference I see here is that the stock of most of the companies which crashed in 2001 initially rose strongly on the back of speculation. In the case of FB/ZNGA etc, the stock has consistently fallen since IPO.
The market mechanism appears to be working here in a way it failed in 2001.
revenues != profit. 50% of their revenue goes directly to the company's running the campaign. They then need to cover all business expenses ect with the other 50%. Assuming constant rather than declining sales and 5% of revenue being actual profit they would be worth ~300m + cash on hand or ~1.5 billion. Also, while they might be 'profitable' if there sales are declining without unsustainable advertising they may be worth little more than their cash on hand.
PS: While they might seem like a tech company with high R&D costs that scales really well, they actually need a huge sales force to deal with local company's so they are stuck with crap profit margins relative to most tech stocks.
Groupon Loses Market Share as Online Daily Deals Decline(By Douglas MacMillan on August 15, 2012)
At Groupon Inc. (GRPN), daily deals are fading. That’s the message the company sent many investors this week when it reported a decline in gross billings, or the total value of goods and services bought on its site, between the first and second quarters of this year.
Options were on the to-do list that never got done. I've not traded options before so it would be a bit of a time commitment I didn't have to research first. Though I'm guessing the buyers of the options would want a hell of a premium also, so the benefit would be in the leveraging and not the margin.
The parent asked why you weren't /selling/ call options. So if the premiums were high, then you would be making a larger margin. Perhaps you confused it with buying puts?
Just for a bit of context, Facebook makes approximately 2x Groupon's revenue yet their market cap is 12x. Groupon made a net income of $32M in Q2 2012 while Facebook saw a net loss of ($157M).
Might want to adjust your shorts. Groupon doesn't have much further to fall.
As a Google shareholder i was always strong against spending money on this uninteresting, uninovative and unsustainable shack. Well, nobody cared for my opinion, I want some sort of online and realtime voting system for shareholders. A bit like LQFB but with one vote per share.
