So … Groupon (NASDAQ:GRPN) … yeah.
What to say? It’s now under $5 after pricing at $20 and briefly popping to $28 for its late 2011 IPO. That’s a 75%-plus loss for Groupon stock from its offer price and more than 80% down from its peak. The company continues to see growth headwinds and suffer from messy accounting and the general impression of mismanagement.
This is a painful story for boyish Groupon CEO Andrew Mason. And it’s not just because he is the founder and because he has a tremendous holding of his company’s stock, with paper losses in the billions.
It’s because he could have completely avoided this mess in early 2011 — and walked away with his ego intact, a heck of a lot more money and a much more secure future.
That makes Groupon one of three companies in the last year or two that foolishly spurned big buyout offers only to go it alone — and fall flat on their faces.
Flop #1: Groupon
Groupon was courted by tech giant Google (NASDAQ:GOOG) for something approaching $6 billion, according to various reports. It wasn’t hard to see why — the company essentially created the daily-deals business and was growing fast as it courted advertisers.
As the king of digital ads, it was only a matter of time before Google came knocking.
But Mason didn’t want to accept because he thought Groupon could keep growing. And initially, it did — from 2009 to 2011, Groupon’s revenues went from a mere $14.5 million to $1.62 billion. During this time, the company hired more than 10,000 employees and built operations in 44 countries.
The problem was GRPN burned all its cash to expand, was paying merchants late and messed up its financial statements with sloppy accounting. As Tom Taulli put it, it was shades of dot-com flop Webvan for Groupon that should have spooked anyone close to the company.
Meanwhile, Google and Amazon (NASDAQ:AMZN) decided to get into the deals space, and still-private LivingSocial was also growing.
Now Groupon has a market cap of a mere $3 billion and could go even lower. That $6 billion price tag from Google looks mighty good now — and considering the stress of running this company has to be huge, the peace of mind alone might have been worth it for Mason and other leaders at Groupon.
Flop #2: Yahoo!
The scuttled Yahoo! (NASDAQ:YHOO) deal from 2008 is another story of tech egos gone awry.
Let’s turn back the clock to those days before the financial crisis, where Google is the undisputed king of search and the “Web 2.0” revolution was starting to show its power. The Apple (NASDAQ:AAPL) iPhone was about to make a splash with its second incarnation, Facebook (NASDAQ:FB) was coming into its own, and legacy tech giants like Microsoft (NASDAQ:MSFT) were seeing headwinds.