Friday, June 03, 2011

Groupon IPO: Massive Insider Selling Raises Huge Red Flag [Business Insider]

Caveat emptor…

We knew that in Groupon's past two financing rounds, founders had taken money off the table. But on top of that they also extracted dividends and stock buybacks from the loss-making company. While founders taking some money off the table has become relatively common, and generally for good reasons, Groupon has been extreme. As AllThingsD's Peter Kafka notes, Groupon has paid out $930 million to employees and investors; astoundingly, out of the $130 million it raised in its penultimate round, $120 million went to the founders' pockets.

The reasons why this is a huge red flag are obvious: information asymmetries and agency problems.

Groupon IPO: Massive Insider Selling Raises Huge Red Flag

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