Monday Grok: Again, Groupon is a crock, and the pack smells blood

Tanking stock, vampire squids and Palming off BlackBerry

Who remembers Groupon? Yep, that's right. The shooting star of dotcom 2.0 IPO and the biggest dotcom stock market blazer since Google has already crashed and burned on the markets. Followers of Grok will recall our scepticism about the company, its model and its market value from this piece written shortly after the IPO. It turns out we are not alone.

Having listed at $20 and popped to over $30 on the first day, the group buying leader has not so much dipped below the water line as deep dived feet first. It closed on Friday at a shabby $16.75 and the trend is not its friend.

Ride the roller coaster vicariously over here at Nasdaq — it's cheaper than the real thing and twice as much fun.

At the time of our initial smack down, Grok actually imagined how a pang of conscience might feel, having been so derisive of the company — but it was only an imaginary pang, mind you. Three weeks on and the pack smells blood. Here's the article we wished we'd written that Forbes published yesterday and it's pretty much laser sniper accurate from our perspective. Here’s just a sample to whet the appetite, "This is a prime example where a simple review of the offering prospectus told you loud and clear to avoid this stock at all costs. No matter that Goldman Sachs’ Lloyd Blankfein couldn’t get on a plane to Chicago fast enough to pitch his firm to underwrite it."

Good old Goldman Sachs, Grok's favorite investment bank, and everyone else's too, up to their old tricks again. Now you know why Rolling Stone called it the great vampire squid, "relentlessly jamming its blood funnel into anything that smells like money."

Back over at Forbes, the author is only getting warmed up on Groupon, "And then there were 10 other underwriters clamoring to get into the deal. It is simply a sign of how bad the times are. All 11 should have refused to underwrite this deal at all. The principals were busy extracting hundreds of millions for themselves from share sales in the last private round. The company needed the money for its own coffers but it went to them instead. They totally gamed the system for their own largesse." Without the IPO, says the author, Joan Lappin, Groupon would already be bankrupt.

And if you need reminding again why Groupon is a crock, point your browser over here. It is as good an explanation as any for why 95 per cent of merchants don't go back to Groupon a second time. The 95 per cent level is a figure quoted in the Forbes story. Although it's unclear whether that's a real metric or simply more of a biblical number, it’s meant to represent something very big and unpleasant — something very much like Groupon, as a matter of fact.

Speaking of put downs...

The new Palm. Now, there's a left handed compliment and a half, straight off the home page of <i>Business Insider</i> yesterday . BI has been down on BlackBerry for more than ages, and Henry Blodget now writes that nothing about the company's recent conduct has changed his earlier assessment. Blodget makes the point that when he first made the comparison with Palm, BlackBerry was trading at $50 and now it's down to $16. That's still a hefty $8 billion company but Business Insider speculates that if the value drops much further it will open the door for any number of potential buyers such as Microsoft, Nokia or Samsung to have a crack.

Not everyone in the BI tent is so hostile though. On the same site, at the same time, Business Insider contributor, Matt Linley, explains why he is still a berry devotee, with a classy put down of his own. He calls the iPhone, "an iPod duct taped onto a phone. Of the 28-some odd gigabytes of space available, 98 per cent of that is devoted to music. The iPod app has seen more use than every other app on the phone combined. A close second? Email. Third? Text messaging. Then Facebook and Twitter. A distant sixth-place contender is web browsing and navigation."

Ours is still an industry that eats it own young. It was ever so.

Andrew Birmingham is the CEO of Silicon Gully Investments. Follow him on Twitter @ag_birmingham

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