Is Buying Groupon Stock A Good Deal?
ROBERT SIEGEL, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
GUY RAZ, HOST:
And I'm Guy Raz. Groupon, the popular daily deal website, offers discounts on everything from hotel rooms to body waxing. Now, Groupon itself is up for offer. The Chicago-based company is getting ready for its initial public offering on Wall Street tomorrow and, not surprisingly, there is no Groupon deal for that. Shares will go for $20 apiece, which will value the company at more than $12 billion.
So is stock in Groupon a good deal? For more, we're joined by Wailin Wong, she's a business reporter for the Chicago Tribune. Welcome to the program.
WAILIN WONG: Thank you.
RAZ: Wailin, first, how anticipated is this IPO?
WONG: This IPO has quite a lot of buzz on it. Certainly, in Chicago, it's one of the most anticipated IPOs in years and I think, within the tech community, it's also gotten a very, very large amount of buzz and also controversy. And it's been a quiet few months for IPOs, in general, so people are really concentrating on this one.
RAZ: Wailin, Groupon was offered, what, $6 billion from Google just a few months ago? Google offered to buy the company. They, of course, rejected that. Since that time, Groupon has had some pretty big setbacks, right?
WONG: Yeah. The five months or so since Groupon announced its intention to go public have been a little bit rocky. They had some issues with what the SEC calls the quiet period in which the company's not supposed to be commenting on its business, etc., while it waits to go public. And in one kind of big misstep, the CEO of Groupon, Andrew Mason, issued a pretty long and feisty internal memo to employees defending the business from its critics and that was almost instantaneously leaked to the press and so they had to kind of adjust their SEC documents to account for that particular disclosure and they've been revising their documents to reflect kind of new accounting methodologies that have slashed their revenues and, in the meantime, have attracted a fair amount of criticism for their business model.
RAZ: So what were those accounting issues?
WONG: Groupon was using a figure for revenues that was actually the total amount that they collect for Groupon. So, for example, when Groupon sells a coupon for $10, it usually splits that with the merchant, so for simplicity's sake, we can say Groupon takes $5, the merchant takes $5. Well, Groupon was counting the $10 as revenue when it should have been counting the $5. And so they had to revise their documents to reflect that and, when they did that, the revenues fell by quite a bit, almost 50 percent.
RAZ: Wailin, there are some good questions being asked about Groupon's business model. Some argue this is easily replicated.
WONG: It's true. I mean, Groupon's business model has virtually no barriers to entry. You need someone making sales calls and you need a website that is set up to handle credit card processing and online payments and that's pretty simple. And that's why you've seen hundreds of Groupon clones pop up overnight after Groupon launched.
RAZ: And its biggest competitors are Living Social and even Amazon has jumped into this game.
WONG: Yeah. Groupon faces quite a few competitors. Today, Google, which is now doing local offers of its own, actually had a national deal for REI, the outdoor outfitters, and that has...
RAZ: Oh, that was today, huh?
WONG: That was today. And that has sold thousands, even just in a few hours, and so when you've got someone with the muscle of Google coming in, you really have to pay attention.
RAZ: If all of these big companies are getting into this game, how is it that Groupon could potentially be valued at $12 billion tomorrow?
WONG: You know, Groupon would argue that its business model is actually getting harder to replicate and that it's now doing quite a lot on the technology front that is going to kind of revolutionize eCommerce. It believes that it can be kind of the Amazon of local commerce and local advertising and that not only can it help local merchants with getting people and new customers in the door through discounts, but that it can also develop programs like loyalty programs for merchants so that they keep and retain those customers.
RAZ: That's Wailin Wong. She's a business reporter for the Chicago Tribune talking about tomorrow's IPO of Groupon. That's the daily deal website. Wailin, thank you so much.
WONG: Thank you. Transcript provided by NPR, Copyright NPR.