Be honest: Would you buy shares of a company that creates a loss of $114 million in a quarter and within the same period generates only revenues of $270 million? Moreover, it promises for the time being to make no gains in the near future.
An absurd idea, you would say. Maybe not, if you believe in Groupon and their creativity to redefine fiscal figures, for example, the balance ratio "adjusted consolidated segment operating income," just CSOI. With this figure, Groupon made out of this loss of $114 million a gain of $81.6 million. The CSOI wonder pill is based on simple arithmetic operations: Marketing and acquisition costs in an amount of about $380 million are not taken into account.
Nevertheless, Internet start-ups are difficult to evaluate with traditional accounting methods. Rated by the balance sheets and income statements, they have very little values. An online portal, which sells discounts on products and services, may never operate profitably. But as a division for a large group, it could be an essential. There are good reasons that search giant Google (GOOG, Financial) was very interested in Groupon a few month ago.
The Internet telephone service operator Skype, who was bought by Microsoft (MSFT, Financial) in recent days, is a comparable case. Its business model is vague, yet the assessment reached billions of dollars. Therefore, one should also be sure that Groupon will find enough investors for an IPO. For those who don’t believe in CSOI, they can speculate on the opportunity to sell their stake later with a premium to investors who share their greed. Should the dot-com bubble not burst, their bet could have succeeded.
An absurd idea, you would say. Maybe not, if you believe in Groupon and their creativity to redefine fiscal figures, for example, the balance ratio "adjusted consolidated segment operating income," just CSOI. With this figure, Groupon made out of this loss of $114 million a gain of $81.6 million. The CSOI wonder pill is based on simple arithmetic operations: Marketing and acquisition costs in an amount of about $380 million are not taken into account.
Nevertheless, Internet start-ups are difficult to evaluate with traditional accounting methods. Rated by the balance sheets and income statements, they have very little values. An online portal, which sells discounts on products and services, may never operate profitably. But as a division for a large group, it could be an essential. There are good reasons that search giant Google (GOOG, Financial) was very interested in Groupon a few month ago.
The Internet telephone service operator Skype, who was bought by Microsoft (MSFT, Financial) in recent days, is a comparable case. Its business model is vague, yet the assessment reached billions of dollars. Therefore, one should also be sure that Groupon will find enough investors for an IPO. For those who don’t believe in CSOI, they can speculate on the opportunity to sell their stake later with a premium to investors who share their greed. Should the dot-com bubble not burst, their bet could have succeeded.
