Groupon's days are numbered. The investors (stockholders) who provide the company's financing, as well as regulators and Wall Street analysts, are all catching onto Groupon's phony premise. Groupon claims to be a marketing company, but in fact it just provides short-term, unsecured, sub-prime loans to small merchants in exchange for exorbitant fees and interest.
Unsecured because Groupon does no risk assessment on its borrowers (the mom & pop restaurants and businesses who sign up). In other words, if the corner burger bar goes out of business tomorrow, having first slurped up the starkly discounted but lump-sum advance payment for a thousand or so Groupons, Groupon is on the hook to refund the deal's purchasers.
And since, virtually by definition, the businesses that sign up for Groupon promotions are desperate, irresonsible and financially illiterate, Groupon has a huge liability issue with these refunds. At the very least, the exposure should be noted in its public statements, now that it's a publicly traded company.
But no, Groupon continues to pretend that the problem doesn't exist and buries these liabilities deep inside its murky financial statements. On the other hand, it's quick to book the entire value of a daily deal as income, conveniently ignoring not only its kickback to the restaurants but its reserves for refunds.
Don't take my word for it. A securities analyst named Rocky Agrawal did the math. It's not pretty.
Agrawal argues that Groupon is actually a "receivables factoring business." He, along with several other Wall Street watchers, predicts that Groupon's stock price will sink into the single digits very soon.
Can't happen too soon for my taste. I've been hearing regularly from merchants who thought they could withstand a modest Groupon promotion, but there's no such thing. Categorically, Groupon is poison for business owners.
And all you would-be enlightened shoppers out there, scouring the Internet for bargains and coupons and deals, you're buying arsenic and feeding it to the very business owners you claim to support. And then you have the nerve to go on Yelp and complain. For shame, for shame!