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Groupon's IPO Has to do Better, Critics Say

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Groupon's IPO Has to do Better, Critics Say

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CHICAGO, IL - NOVEMBER 02: Michael Conneely (L) and Andy Freedlund take orders in the Ten-Year Treasury Note options pit at the CME Group following the Federal Reserve's announcement that interest rates would remain unchanged November 2, 2011 in Chicago, Illinois. The Federal Reserve announced that interest rates would remain unchanged. (Photo by Scott Olson/Getty Images)

As the immeasurably wise Huey Lewis once informed his head-bobbing disciples: It's hip to be square.

Looks like Groupon didn't get the message, though. Despite an impressive showing on its first day of trading on Friday (the stock rose 31 percent, closing at $26.11 after hovering near $30 beforehand), the Wall Street Journal and lots of blogs are predicting this could be the beginning of the end for Andrew Mason's company. Groupon has its share of detractors, sure, but now that the IPO is no longer hypothetical, we're all being confronted with cold, hard facts. And it's starting to sound like Groupon's future was sunnier before it became the hip company everyone's heard of with unfortunate growing pains.

"People are really focused on Groupon now, which can be helpful publicity for the IPO market. But investors will be looking for good performance from a broader group of IPOs than just Groupon in the weeks ahead," Carter Mack, president and co-founder of investment bank JMP Group, told the WSJ.

Investment blog Seeking Alpha piggybacks off this, noting that as Groupon has gotten more popular, it's gotten more and more expensive for it to acquire new vendors. The only way to make up for that is by increasing its subscriber base's spending, but all evidence shows that just the opposite is happening.

Seeking Alpha's Charlie Zhou muses that since "revenue per subscriber is plummeting in the US and is flat in Berlin and London; if that's what is happening with its showcase cities, I can't imagine how other cities are faring." Most damningly, Zhou then concludes that "the current model of Groupon is not sustainable."

Maybe that's why we've been seeing Groupon adopt a let's-throw-it-against-the-wall-and-see-if-it-sticks policy in introducing new initiatives lately?

If nothing sticks against the wall, we're likely to see investors lose interest with Groupon after the next hip startup that explodes.

Related Topics Groupon, IPO, What Else Is New?
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