Groupon Is Kinda Insolvent
Groupon plans to sell itself to the public at a $30 billion valuation. It's worth noting, then, that the online discounter has accumulated liabilities that greatly exceed its assets and is now running low on cash. The technical term for this is "broke ass poor."
As of its last SEC filing, Groupon owed merchants $392 million versus $225 million cash in the bank, Business Insider notes. It also owed $681 million in current liabilities with just $376 million in current assets. Even if you factor in intangible and deferred assets, Groupon owes more than it possesses, meeting the definition of "balance sheet insolvency."
In terms of cash, though, Groupon remains solvent, since it can keep paying old liabilities with money generated creating new liabilities, i.e. by selling Groupons. But the company needs to keep growing; if it slows down too much, or hits a big bump in the road that, God forbid, dramatically decreases sales even temporarily, it's deep in the shit. Or, as Business Insider puts it, "the company may not be able to sell enough new Groupons to pay off its old bills, and then it will face a serious cash crunch." Maybe this situation will make the company regret paying out such a huge percentage of its funding in bonuses rather than saving it as cash reserves. Then again, maybe top executives are very glad they cashed out while they still could. Groupon seems to be one of those companies that looks more precarious the closer you get to it.