Seeing that the lion share of the two recent funding rounds were used to pay back investors, leaving very little on the table to fund their growh (this is when they are bleeding over 100 million per quarter) sounds unbelievably stupid or criminally insane.
This was a purchase: the investors bought part of the company. When they signed over a billion dollars, they were not trying to fund operations; they wanted to become part owners. They know that the vast bulk of the money would go straight to earlier employees and investors.
This was a risky investment, yes. But it is neither unbelievably stupid nor criminally insane to make a risky investment. High risk investments can be quite at home in a well developed portfolio.
Now, if Groupon deceived the investors about where the money was going, that would quite possibly be a criminal act. Literally. But that almost certainly didn't happen, or we'd be hearing about it.
I cant agree with that. When I invest, I have some expectations as to how that money should be invested, and for a company that is in desperate need of cash inflow to sustain its growth, thats where it should go. Period. Not to the coffers of early investors and employees. No one has any problem with them cashing out a part of their equity. This however (almost 400 million went to an early investor couple!) was a careless and completely selfish act to line one's pockets.
And now, they are ready for the next round, and only this time, its the public who stand to get scammed.
When I invest, I have some expectations as to how that money should be invested
More than that, you have a prospectus (or term sheet) that will specify those kinds of things. In this case, the Series G investors knew exactly where the money was going, and they were ok with that.
As for the public getting scammed, the SEC has a metric buttload of regulations aimed at seeing that that doesn't happen.
I am not worried about the Investors who led the G round being scammed out of anything. They knew what they were getting in to. I was pointing out how irresponsible this move was, on the part of the Groupon team to allow this to happen. One one side, you have a company bleeding money aching for growth and spending over 200 million just in Ads and over 320 million in salaries to their 8000 sales staff. And you choose to cash out instead of plowing it in to maybe eking out a better profit margin than last year? They are not even trying, for Christ's sake!
And I dont have to look that far back to see how effective the SEC has been, with their metric ton buttload of regulations. You dont live in the US, do you?
Seeing that the lion share of the two recent funding rounds were used to pay back investors, leaving very little on the table to fund their growh (this is when they are bleeding over 100 million per quarter) sounds unbelievably stupid or criminally insane.
Its one for the history books boys!