"Wildly Profitable" = Wildly....Wild?....Lefkofsky's stumble and Maples Likes Groupon

"And that's about the time she walked away from me

Nobody likes you when you're 23."

- Blink 182

Groupon CEO Andrew Mason isn't necessarily 23, he's 30. Groupon's other Co-founder, Eric Lefkofsky (above) is 41. But the last few weeks have seen both men do some weird and immature things. From Mason's death stare at the D9 Conference when asked about a potential IPO, to the SEC filing mentioning we're unusual and we like it that way, to Lefkofsky's (who owns 22% of Groupon, $4bil from IPO) interview on Bloomberg last week where he said Groupon is "wildly profitable." Why's this such big news? Because Groupon may have to file another S-1 form to the SEC because its possible that Groupon knows something the public does not. From last week's S-1 filing it was evident that Groupon has incurred losses in the $400million range, not profits.

From the current SAC Capital investigation to the Galleon Group case, we've seen a fair share of insider trading already this year. This isn't necessarily that, but the Groupon situation does pause for some concern. By rule, you're not allowed to disclose or talk about Groupon's financials to the public pre-IPO, particularly with things that aren't mentioned in the S-1. Two other private companies are close to going public as well: Fusion-io, the developer of flash memory technology, and Pandora, the music subscription site we all know and love. Fusion-io increased its price to $16-18 per share to a valuation of $1.4 billion. Pandora will be in the $7-9 per share range with a slightly lower valuation at around $1.2 billion.

Yes the IPOs are coming, we all knew it would happen eventually. Did LinkedIn's thunderous opening day create a frenzy? Clearly yes, but I don't think it was the catalyst in deciding what companies are going public. There aren't many profitable private companies out there we haven't heard of who are rushing to go public and then will go bankrupt because the public interest will be zero to none. The big sharks will flood the gates within the next year: Zynga, Groupon, Facebook, maybe Gilt and Yelp. Does this mean there's a bubble if we have these significantly different companies going public, most of which are profitable? It's more of a bubble than the past 5 years, yes. But 70% of companies that are IPOing in the past couple years have been profitable, that wasn't the case in the late 90s.

Companies like SecondMarket and SharesPost, where privately companies are traded don't seem to be the reason companies are waiting longer to go public. The reason is it takes a lot of money for an IPO raise from the investors and from the public. $250-300 million at least. Not every private company like Etsy, Yelp, or Spotify can do that, yet. So why's Facebook waiting so long to go public if they're valued around $85 billion on the private market? VC Investor Alan Patricof thinks Zuckerberg doesn't want to be scrutinized if they go public and then have unprofitable quarters. It doesn't make Facebook look strong. It's better to be patient, to grow as a company, and get some good political figures on your side, which is exactly what Facebook is doing.

Super Angel investor Mike Maples of Floodgate Fund, said Groupon reminds him of AOL in its early days. Everyone thought AOL was a joke when they started mailing floppy disks to your house and had a cheesy user interface and dial-up connection. Next thing you know, AOL becomes the most widely used form of internet. "Any company who's just 3 years old and goes from 0 to $500mil in revenue is something to pay attention to," he adds. I think Maples is being overly optimistic but given Lefkofsky's recent comments and the comparisons of Groupon to either Amazon or AOL in their nascent stages, maybe just maybe Groupon is the real deal. I think they do have a big advantage with being the first mover in the coupon buying industry. There are other big players such as LivingSocial, Google, and Facebook. But Americans especially tend to be loyal to the biggest industries. Just look at all the bandwagon New York Yankee fans there are.