July 22, 2018

insolvent much?

Is Groupon Getting Cold Feet?

Maybe! The Wall St. Journal reports that the “site isn’t cancelling its initial public offering […] but is reassessing the timing for an IPO on a week by week basis,” because some people have gotten spooked by this big, scary economy. Okay, things are actually pretty frightening out there but Bloomberg’s sources say that the company also “needs time to address regulators’ questions, including possible revisions to a controversial accounting method used in its filing.” But all this – or insolvency, for that matter – isn’t any cause for concern since this just like a couple postponing a wedding. They just need more time. [WSJ, Bloomberg]

Today’s Groupon: Sorta Insolvent

Technically, we should say as of June 30, 2011, as the company had $376 million in current assets and $680 million in current liabilities for a negative working capital of $304 million. In accounting terms that’s known as notveryfuckinggood. Henry Blodget doesn’t want to freak anyone out but if things continue as they have been, this could end up being a helluva problem:

Companies can operate with a working capital deficit as long as they have another source of cash to cover the bills as they come due. Right now, Groupon has this source of cash: rapidly growing Groupon sales. As long as Groupon sells enough new Groupons in one quarter to pay all the bills it racked up in the prior quarter, it will not need additional cash. But if the company’s growth stumbles, or if competitive pressure leads to Groupon’s gross profit margin getting squeezed, look out. Under those scenarios, the company may not be able to sell enough new Groupons to pay off its old bills, and then it will face a serious cash crunch.

S-1 [SEC]
Don’t Mean To Be Alarmist, But Groupon Is Running Low On Cash [BI via Gawker]