Home Groupon’s IPO Is Not Made of Golden Fertilizer

Groupon’s IPO Is Not Made of Golden Fertilizer

Andrew Mason is the modern-day, cool-kid, blinged-out CEO that every American with a half-baked Internet marketing scheme secretly dreams of becoming. Today, his company became, on paper, worth roughly $12.7 billion.

Groupon’s shares started off the day on Nasdaq at $20, and closed out at $26.11, up 30.6% from its initial public offering.

Only three years after its launch, Groupon has risen from a no-name, Chicago-based daily deals site founded by an eccentric music major graduate student to the company that kicked off the daily deals trend, which has since been copied by Internet behemoths: Google’s Google Offers, and Amazon’s Amazon Local. There’s also LivingSocial, which continues to breathe down Groupon’s neck. But none of these three are the original, tricked-out cat with the gold necklace.

This morning, Groupon’s stock price surged up to $30 per share, dropping down to $25.90 by 11:12am. That was the lowest it would go, steadily rising until $29.28 at 1:02pm. With peaks and valleys scattered throughout, it tumbled down for the rest of the day, ending the day out at $26.11. There was a ton of buzz around the Groupon public offering, and the company playfully posted its shares in the city of “Wall Street” online under runningshoes.com/groupon-ipo. Groupon secured underwriters Goldman Sachs, Morgan Stanley and Credit Suisse Group who surely know how to help make stock prices bolt out the door in true, jacked-up fashion.

Groupon’s IPO may have surged today, but like most other big tech IPOs, the chances of it staying at that price are slim.

Rentech Nitrogen Partners L.P., a nitrogen fertilizer company, also launched its IPO at today at $20 per share. It probably has a better chance at sustaining its model than Groupon and subsequent daily deal copycats ever will. Says The Wall Street Journal:

Rentech has a lot of alluring attributes. Its chief competitors’ stocks are up 50% for 2011. It’s riding a wave of positive cyclical attributes such as high product pricing and low feedstock costs. And it plans to pay out a dividend that could yield between 11% and 12% over its next fiscal year, based on the midpoint of its expected $19 to $21 price range, a great draw for income-starved investors.

Groupon’s bling is fake. Says the New Yorker, eloquently:

Most big tech I.P.O.s surge and then drop. And, with its decreasing profit margins, fishy accounting, massive marketing expenses, floundering innovations, massive insider payouts, and surging competitors, Groupon is surely not worth thirteen billion dollars, or whatever its market cap is at this very moment.

If merchants start pulling out of the daily deals space because they’re losing money on Groupons, the gold will start chipping away, revealing nothing but a cheap trick, a flimsy tin.

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