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Why You Should Think Twice Before Investing In Groupon

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Why You Should Think Twice Before Investing In Groupon

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Groupon's meteoric rise has been the stuff of legend in Chicago. In fact, even if you've been vaguely familiar with the company, you might be entertaining the notion of investing in it to parlay the future earnings into funding entrepreneurial endeavors of your own. But in a recent post, CNN Money has made some observations suggesting you should consider holding off.

For starters, Groupon's business is already yielding diminishing returns in established cities like Boston. Also, it's spending more money than it's earning, which isn't unusual for a start-up, but that only works of revenue is up. Finally, the post warns:

You'll have no voting rights, all voting power belongs to Mason and a few other insiders. And yet, you are expected to take on unnecessary risks -- risks that could easily have been avoided had insiders not decided to pay themselves hundreds of millions of dollars from venture financing.

Risks are inherent to anything in business, but at least some of them have been laid bare to temper the excitement over Groupon's IPO. Something to consider.

Read the full article over at CNN Money.

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