This has Catanach’s radar up, because typically when a company goes public, it does so for a reason, such as needing funds for operations costs, acquisitions, or expansions. “Why are you going to sit on $800 million for a year? I find that hard to believe, given their history (of payouts to early shareholders),” he said. “I think we’re going to see much of this money diverted to insiders." The reason people are so skittish is that Groupon has yet to turn a profit and it’s growth is slowing. It has narrowed its losses in the third quarter to $1.7 million, and its North American operations turned a profit. But growth is another concern. Yipit, which crunches the data on the daily deal market, put out what it acknowledged was an investor-scaring chart that showed Groupon’s quarterly revenue growth—a torrid 111 percent in the fourth quarter of 2010—coming down to room temperature—10 percent in the third quarter of 2011. One question these potential investors should make sure to ask: What happened to Groupon’s quarter-over-quarter growth rate? Or, better yet, what will happen next quarter? As a public company, a lot more people are going to want to know.
2011 Media Report Villanova School of Business Page 216