If you've been holding out on buying Groupon stock under the modus operandi you should buy low and sell high, now might be the time: as of press time it's at $13.78. For those keeping score at home, that's the lowest the stock has been since earlier Monday morning when it was at $13.55. In laymen's terms: Things be bad for Groupon right now.
So, what does this mean in the grand scheme of things? Venturebeat points out that Google News' algorithm is putting the Enron logo next to a story about Andrew Mason's company, which means, well, nothing good at all for Groupon. Here's what Rocky Argawal, the author of that piece, predicts:
When Groupon collapses, it will cause some serious pain for Chase Paymentech and possibly American Express. I estimate that Chase has at least $500 million in chargeback liabilities if Groupon goes under. But because Groupon doesn’t accurately track which Groupons were redeemed, this liability could be much higher. Any consumer who has purchased a Groupon could claim they didn’t get what they paid for. I called on credit card companies to take a look at their exposure from Groupon months ago in a Bloomberg West appearance.
The biggest losers in a Groupon collapse would be the small businesses who run Groupons. As of the end of the 4th quarter, Groupon owed small businesses $520 million. The real figure is likely at least $100 million higher. These are people who can hardly afford to take a hit of several thousand dollars.
Notice that the language around Groupon is now "when Groupon collapses," not if. If we want to understand what Groupon can do to get out of this situation, though, it's helpful to understand how it got here. The Telegraph asserts that Groupon was a victim of its own success, which is a great turn of phrase we've all probably heard before, but here it means specifically that "many of the problems that angered customers were due to" things like Groupon setting limits on deals too high -- simply because Groupon itself had gotten a following big enough to allow that, and either forgot or just stopped informing merchants to maybe set lower limits. That would certainly explain incidents like the infamous cupcake sale.
Crain's zooms in more on Andrew Mason's missteps as CEO (there have been seven major ones since 2010) and examines something I suggested: That Mason step down and possibly rejoin his company after it stabilizes. It isn't exactly the same story, but Steve Jobs did something similar with Apple back in the day. Ask yourself, though: Is Andrew Mason really the next Steve Jobs?
David Wolinsky is a freelance writer and a lifelong Chicagoan. In addition to currently serving as an interviewer-writer for Adult Swim, he's also a columnist for EGM. He was the Chicago city editor for The Onion A.V. Club where he provided in-depth daily coverage of this city's bustling arts/entertainment scene for half a decade. When not playing video games for work he's thinking of dashing out to Chicago Diner, Pizano's, or Yummy Yummy. His first career aspirations were to be a game-show host.
