Bizarre changes in fortune at Daily Deal sites LivingSocial and the original, Groupon, all on the same day.
LivingSocial announced today that it has raised 110 million usd in funding from largely, its original investors - so that sounds more like a "cash call" which might indicate difficulties at LivingSocial if it is.
A memo from CEO Tim O'Shaugnessy (some Irish connection there I would think...) said it was to "build our reserves". And building they need given a loss of 650 million usd in 2012 up from a loss of 499 million the previous year. Over a billion usd in losses in two years.
It cut its staff by 10% (400) at the time with reports in December that it was "running dangerously low of cash". With losses like that, it's not sustainable.
On the other side, Groupon, the 4 year old, daily-deal-market-maker, fired its co-founder Andrew Mason who was also CEO (that's him above with the cat). It came just 24 hours after reporting bad numbers again for Q1 bring a 25% drop in share value. Now down -75% since it floated which 'Forbes' magazine calls 'The Groupon Disgrace' and said "talk about a CEO who no longer has any credibility with investors". Strong stuff.
Mashable posted his staff resignation letter which actually, I liked.
Groupon was the worst performing stock in the US market in 2012. Shares trade below 3 usd now, from when they floated at 20 usd. 11 billion of value has been wiped out. Groupon had turned down an offer of 6 billion usd some years ago from Google. And you might remember the accounting controversy at the time of the IPO.
What interests me in both of these stories is that you'd expect, in a recession, deal sites to be doing well. After all, it's in a recession that people want a deal and all the PR was, that this was what was happening. When clearly it's not and especially not for the segment leader, Groupon.
So I'm surprised.
But then again there could be a more simple explanation. The market is good but these two companies were lousy. It could just be that, although that would surprise me.....
It seems that's what Forbes thinks who undoubtedly contributed to Andrew Mason's demise because they're such an influential magazine. Mind you, they seem to have forgotten that at the time before the IPO they were influential too calling Groupon, "the fastest growing company, ever".