Friday, June 03, 2011

Get while the getting's good

LinkedIn. Groupon. Zynga. Pandora. All rushing for the IPO exit with what looks like unseemly haste.As Dan Primack says unease is not based on the above concerns. I’m already on record as saying there’s a bubble (albeit not as severe as 1999), and I think that Groupon Now shows that the company is able to smartly evolve beyond its core product.

Instead, this is about Groupon’s seeming obsession with liquidity. Remember, it wasn’t too long ago that Groupon raised a $950 million Series E round of which $573 million was used to partially cash out early employees and shareholders. Then there were reports that the company was pushing to go public even without having its bankers in place. Then it files just one month after hiring its #2 to Mason (following the surprise resignation of Rob Solomon). And the S-1 says that some of the shares being offered will come from “selling shareholders” – as opposed to all coming from the company itself.

I buy the broader arguments in favor of founder liquidity, but we’re way beyond “paying the mortgage” here. And while Groupon throws off tons of cash, it’s wildly unprofitable. Were the Groupon IPO roadshow making its way to the home office, I’d simply ask: “Why the rush?” It can’t simply be for working capital, since it could have held some of that earlier $573 million back (or not let insiders sell via the IPO). Then I’d hope the answer doesn’t scare me more…
There's optimism that there are plenty of greater fools around right now.


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