Makes you wonder why he didn't exit when he had a chance at $6 billion. I doubt groupon will ever see that type of valuation again considering how terrible their coupons have become and how natural competitors in the space like local papers and yelp are beginning to gain traction.
nh posted a video below which states that based on a $25B valuation, Lefkofsky will grab $5.3B, as he owns 22 percent of Groupon. That's a hell of a lot more than he'd have made in the Google deal.
Groupon stock only has to hold its value long enough for his lockout (usually 6 months) to end. It's usually not hard to do that - when things come crashing down, it's usually a few years in the future, not months.
Not really. Unloading 20% of a company without telling anyone is both hard and, I think, illegal (as an exec). This is one of the reasons Bill Gates' stock sales are so consistent is to keep the market from freaking out when he sells stock. (Ohmigod, Bill sold stock! Oh wait, he's done that every month for 10 years... nevermind.)
Lefkofsky might be able to hedge against the decline of the stock, but hedging 20% of a big company (especially because it'd be difficult to build a portfolio which replicated Groupon's situation and risks) is a pretty tall order.
All that said, I tend to agree with your sentiment...
Or considering how Facebook could basically annihilate Groupon in the blink of an eye if it ever decided to get into that business model. Not only are Groupon's financials highly questionable, but its position is practically indefensible and does not contain any real "switching costs" to keep users locked in or loyal.
Give the man some credit for starting 2 companies that went public and are profitable, selling another one for nearly a quarter of a billion, and now has been involved with the fastest growing startup in terms of revenue.
He seems like a smart man, but I also think that his cashing out of hundreds of millions of dollars worth of stock pre-IPO doesn't have a good explanation unless he has reservations about Groupon's long-term viability. Groupon's numbers are pretty horrible and the space is getting more and more competitive.
It is because I think he is smart that I think his cashing out to the extreme is a very bad sign. Otherwise, he should have kept the stock and been significantly richer upon the IPO of Groupon.
This is ridiculous to compare Groupon to mortgage derivatives.
This is what Groupon is guilty of so far:
1. Having such a profitable business model that everyone and their mom has launched a copycat or sub-niche clone in a fairly short time span. (Google, Facebook, Amazon, and countless other small players.)
2. Bowing out of a Google acquisition over regulatory concerns that arguably would have derailed their growth.
3. Re-investing what would have been profits right back in to the business instead of sitting on them.
4. Letting early investors cash out early.
The competition in this space is brutal and the top players have seemingly bottomless pockets . Without an IPO Groupon will fail. With it, they have a chance of being around for a while.
The "quality of deals" issue is separate. Just like a novice advertiser can blow a million dollars on display advertising and have nothing to show for it, the novice business can screw up their Groupon/Living Social/any daily deal site offer. That doesn't mean there is something wrong with the model. This is a two sided equation in a marketplace with incredible consumer demand -- its not a pyramid and with or without Groupon it will be around for a long time.
Actually, it generally is how the world keeps score. Unconventional companies like 37signals might not brag about growing headcount or offices, but the reason people take them seriously is because they're lucrative.
You're seriously taking the position that making money is the sole measure of business success? Legality, morality, etc. are irrelevant? Good for you, I guess.
I'm sorry that you have such a cynical view of the world. Fortunately, many people (including people who make decisions about laws and regulations) disagree with you.
1. Remember Enron? Lehman? Arthur Andersen? WorldCom? Parmalat? Countrywide? I could go on. I suppose the rule is "you're an amazing entrepreneur (unless you get caught)"?
2. It's you and me who pay the price when these companies collapse.
