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Originally Posted by Nowhereman1280
No, the SEC was reviewing it because they tried a type of accounting that ignores marketing costs which would indeed have inflated their potential for profitability.
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Revenue - Cost = Profit
If you ignore ANY cost, you are lying. It's not an "accounting model." When you're lying to people to get them to give you money, it's called fraud.
I don't know what you don't understand here. You argue that Groupon is a "marketing company that uses the internet," yet you then turn around and seem to intimate that it's OK for them to IGNORE MARKETING COSTS in their business model.
If they are a MARKETING company, wouldn't ALMOST ALL OF THEIR COSTS be for MARKETING???
So Groupon's business model is hypothetically something like...
REVENUE FROM GROUPONS SOLD: $3 billion
COSTS OF...
Buildings
Utilities
Executives
Salaries/Benefits of People who don't work in marketing
Computers for people who don't work in marketing
Etc...
$2 billion
PROFIT - $1 billion
Hence...give us money!!!
But then it's just OK to ignore whatever their marketing costs are? What if their marketing costs are $2 billion? Then there's no profit!
I'm not arguing that they're not a successful business or that they're not profitable, because I obviously don't know the real numbers. I am arguing that they're "accounting model" is bullshit for ignoring costs. You don't project PROFIT without first acknowledging ALL of your costs. It doesn't work that way.
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The SEC doesn't review business models for "sustainability", it reviews the applications to see whether or not they are misleading to the public. After all, there are plenty of unsustainable business models that people buy shares in knowing full well it's only going to last 5 or 10 years or whatever. All business models are unsustainable in the long run.
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Unprofitable = Unsustainable. I wouldn't disagree that Groupon's IPO is going to be gigantic. Hell, I'll probably try to get in on it. But unless they can project a business model that means they are going to make money in the long run, the stock is going to get flipped like a 2006 condo. Buy it cheap, sell it high while the Groupon craze is still rolling, and run for the hills.
I don't doubt they'll be around for a good 5-10 years, but, to bring this all full circle, is that the kind of tenant we want to see in Wrigley building? Or do we not really care so long as somebody's in there?