Groupon?ˆ™s test comes in its follow-through

Chicago Sun-Times November 6, 2011 For Groupon (GRPN), its business success will depend on whether it can improve on a novelty. The same is true for its stock, which closed its first trading session Friday at a 30 percent increase in value.

The IPO itself was a novelty. Big money managers and hedge funds wanted in just in case Groupon proves itself. They didn?ˆ™t want to be left out.

But now comes the matter of building a sustainable business, and Groupon isn?ˆ™t there.

Groupon reports 143 million subscribers worldwide, but that?ˆ™s more than the total number of coupons it has sold since its inception in 2008. It has difficulty converting subscribers into paying customers.

The company has never reported a profit and runs on private equity, a spigot that apparently has run dry. Now it has tapped the public markets.

Morningstar analyst Rick Summer has thought harder about Groupon than most, and he sees many warning signs. The business does not scale well, its competitive advantage is short-term and competitors are emerging everywhere, he said.

Summer figures that Groupon is worth about $8 a share. It closed Friday at $26.11, up from the IPO price of $20. If you buy now, pack a parachute. You might be falling off a cliff. go to site groupon dallas

BLIND QUOTES: The corporation reported its earnings with typical sunniness. Revenue was down because of business volatility and there was a net loss made worse by pesky accounting rules. And this is what the chairman said about all that:

?ˆ?We were particularly pleased with the repositioning of our mortgage, credit and foreign-exchange businesses; the performance of our commodities group; and the common alignment of our brand to strategy. These efforts reflect positively on our ability to execute and deliver competitive returns to shareholders in the quarters ahead.?ˆ?

And this: ?ˆ?Over the course of the past year, we have seen opportunities in short-dated European sovereign credit markets and built a fully financed, laddered maturity portfolio that we actively manage. We remain confident that we have the resources and expertise to continue to successfully manage these exposures to what we believe will be a positive conclusion in December 2012.?ˆ? this web site groupon dallas

The company is MF Global Holdings (MF) and the man quoted was its chairman, Jon Corzine. Six days after the release, his company filed for Chapter 11, a victim of its European debt. Four days after the filing, Corzine resigned.

Meanwhile, we?ˆ™ve had revelations of customer funds missing at MF Global and an unusual statement from the Chicago futures markets that stopped just short of accusing the company of fraud. That formal charge will have to come from the proper authorities.

But maybe that Sarbanes-Oxley Act of 2002, which CEOs love to hate because it requires them to vouch for the accuracy of their reports, didn?ˆ™t go far enough. How about quarterly lie detector tests?

WATCH LIST: Investors should consider keeping an eye on the automotive supplier BorgWarner (BWA), which last week reported a 64 percent gain in its third-quarter profit on a 27 percent jump in sales. It was a stellar report from a stock that doesn?ˆ™t get a lot of attention from Wall Street, even though the price has gained about $20 in the last month. Friday?ˆ™s close was $75.75.

Automakers?ˆ™ demand for new features and technology is behind the company?ˆ™s push into new products. Zacks Investment Research said it has a bullish ?ˆ?outperform?ˆ? rating on the shares for those wanting to hold them for at least six months. Investors may be tempted to buy this one on the dips.

CLOSING QUOTE: ?ˆ?The good news is that we?ˆ™re hiring fast enough to keep pace with population growth, but the bad news is that we need to find jobs not only for all the new graduates, immigrants and moms returning to work, but also for about 11 million people who would have had a job if the economy hadn?ˆ™t cratered in 2008.?ˆ? ?ˆ” Rex Nutting, columnist, MarketWatch.com Jon Corzine, former chairman of MF Global Holdings Mel Evans Fact Box: roeder report David Roeder reports on real estate at 6:22 PM. Every Thursday on News- radio 780 and 105.9 FM WBBM. The reports are repeated at 10:22 p.m. Thursday and 7:22 a.m. Sunday