That Warren Buffet quote doesn't mean you should buy a company that everyone hates. Buffet meant to go after "un-sexy" businesses (like railroads and insurance) and forgo "hot" fields (like technology or media).

The negativity surrounding Groupon isn't that they're boring; the negativity is that they're over-hyped.

I was just thinking about how Google must be rolling in all that cash Groupon spent on Youtube ads etc. And LivingSocial's. And the other me-too's. Talk about selling pickaxes.

Similarly, think of all the "recruiting 2.0" companies that are sourcing the sales team of Groupon and their ilk.

I'm doing very well with my Atmel stock ... just stepped in at the right time ;-)

I disagree.

This reminds me of the pre-Google IPO arguments.

It became popular in the press to pot-shot Google in the days leading up to their IPO.

Their revenue model was too tied to search.

Their IPO structure wasn't sound.

Their biggest growth was behind them.

Groupon is no Google today, but they do have a visionary founder, an incredible brand, insane revenue growth, and address a real problem for merchants and consumers.

> I disagree.

Based on nostalgic feelings about the 2000s?

Warren Buffet and his daughter wrote a whole book on how to go over a company's P&L statements line-by-line and determine whether or not it's a value. Groupon fails that test. That quote is about buying companies that are doing better than the market thinks they are -- and his methodology is a way to find and prove those cases on paper. Not with hunches.

Can you back this sentiment up with anything more than vague comparisons to Google?

If you're actually asking:

"Groupon is no Google today, but they do have a visionary founder, an incredible brand, insane revenue growth, and address a real problem for merchants and consumers."

or see my comments here:

http://news.ycombinator.com/item?id=2618080

and here:

http://news.ycombinator.com/item?id=2613546

Google was profitable. Big difference.

Groupon isn't trying to pretend that they're profitable or that they'll be profitable in the near term. Smart long-term investors will look at their financials and their business model in order to make an educated bet on whether Groupon can successfully transition from astonishing hypergrowth to sustainable profitability -- preferably after the dust kicked up by the IPO clears.

Groupon are trying to pretend they're profitable — that's a major component of the original article here. They even made up a new accounting metric to try to persuade people of this (if you only avoid the pesky sales+marketing spend).

I think this "Adjusted CSOI" nonsense is tantamount to Groupon admitting that they're not profitable.

Google was profitable. And I assume any money they were spending was on architecture/moat not customers. I'm not sure what the economics of the Old Navy deal were yesterday but I assume it was a loss, on the day GRPN announced IPO they were losing money to "look good" it's how their business model works.

" losing money to "look good" it's how their business model works." that's the fundamental problem, their business model is losing money. These types of business models tend to drive poor stock valuations in the long term. See GM for example.

This is a gross misuse of Warren Buffet's famous quote to say the least. I would highly recommend reading about Warren Buffet's investment strategy -- he never talks about buying into the latest high tech IPO. Investing in hot IPOs (or even hyped IPOs) isn't at all how he made his money. He bought into boring industries that everyone was basically ignoring and then he helped them increase their margins by bringing in very good management that was focused on the long-term bottom line. The management at Groupon is very scary as they are clearly cashing out and are not looking at the long term at all.

Also, if there is general negative sentiment (not just isolated as it is now) about Groupon, there won't be an IPO. It could easily be withdrawn and if it is withdrawn, it likely won't come back if what everyone is saying here on HN is true.

Warren invests in what he knows. The fact that he doesn't buy technology stocks is more likely due to the fact that he doesn't know much about technology.

At this year's shareholder's meeting, someone asked him and his business partner, Charlie Munger, which industry they wish they knew more about. Charlie said "technology."

I didn't mean to imply tech IPO -- I did intent to refer to any IPO.

Warren Buffet doesn't invest in IPOs as far as I've read. It makes sense because these are very hyped events that are designed to be the opposite of boring or overlooked.

Investing in IPOs is very much a gamble over which the the investor has no control. It is like buying a lottery ticket in many cases.

Warrren Buffet buys into companies in such a way that he get's control and usually those companies are struggling and need a management overhaul in order to be successful and have a better long-term focus.

I can imagine Groupon crashing and burning and then someone like Warren Buffet or another takeover happening and then its rebuilding. But buying into a hyped IPO before a fall is not at all Warren Buffet's investing strategy.

But this isn't a time when "no one else is" investing in Groupon --- it's a time when a whole lot of major players have, evidently betting on the willingness of a deal-happy general public to buy even more when they can. If they don't, the wolf will be at the door in a hurry.

Which, by the way, is in marked contrast to the kind of negative buzz Google had at the time of their IPO. There were legitimate doubts about the sustainability of their business model, in part because they were deliberately concealing the size of their profits as long as they could to avoid attracting competition. (See Levy, "In the Plex".) But at the time they went public, they were making money, in much larger amounts than anybody outside the company had realized.

As to Groupon: if dhh is reading the balance sheet right, they need the proceeds of the IPO just to keep the company going, unless something very dramatic happens soon. They have only two quarters' worth of cash on hand at the current burn rate. The $750 million from the IPO will extend that by about two years (if the burn rate doesn't go up!). But if you invest, then you're counting on management to pull a not-yet-evident rabbit out of a hat within that time. And you're expecting that from a management team that put most of the roughly $1 billion that they raised off private markets in the last two rounds in their own private pockets (they sold founder shares to the VCs), leaving only $150 million available to the business itself as working capital.

Good luck!

Other Warrent Buffet quotes:

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"

You can't buy what isn't profitable and do well either though.

I don't think Buffet advocates turning off your brain completely.

Three articles about Groupon IPO prove it's a popular and interesting topic.

It also seems that Groupon's business provides diminishing returns the more popular it becomes in a certain city - http://bit.ly/iDslVV

At this point in the tech boom, an underwhelming IPO wouldn't be a bad thing.

Please post the full URI and not the bit.ly redirect on HN. This isn't twitter.