It's not news that Groupon (GRPN) lost money in the second half of 2011 -- no one expected it to become suddenly profitable. But it is interesting that the daily deal company is becoming more unprofitable, and doing so faster. Groupon is losing so much money, so quickly, that the $750 million it expects to raise through its IPO may not be enough to keep the company afloat. Here are the basics for the second half of 2011:
- Revenues: $1.5 billion
- Net revenues (after revenues are split with merchants): $611 million
- Total operating expenses: $831 million
- Total net loss after other items: $255 million
- Merchant payable: $392 million (up from $162 million)
- Accounts payable: $50 million (down from $58 million
- Accrued expenses: $165 million (up from $98 million)
- Due to "related parties": $264,000 (down from $13 million)
- Taxes owed: $13 million
- Other: $62 million
- Total of the above: $680 million
$295 million in unpaid bills
How might Groupon get around this? Doubtless the company would point to its positive cashflow. Groupon has an increasing amount of cash on hand despite its losses because it books its revenues immediately and then delays paying its bills to merchants who offer Groupons and other suppliers. Here's how that worked out in the first half:
- Accrued merchant payable: $217 million (up from $18.7 million)
- Accrued other expenses: $75 million (up from $3 million).
- Sale of stock: $510 million (up from $135 million)
- Total cashflow generated including other items: $106 million
Because Groupon looks like a Ponzi scheme -- it always needs a greater amount of new money coming in to pay off its old debts -- I previously assumed Groupon's plan was that the IPO would generate a cushion of cash on which the company could float for several years until it sorts its business model out. Yet if Groupon collected that IPO cash today, it would barely cover its bills. There are, on paper, three alternatives for Groupon:
- Immediately reduce operating expenses by more than 27 percent and become profitable.
- Sell even more stock after the IPO.
- Go bankrupt.