Saturday, June 11, 2011

Volume 3 Issue 24: Intelligent Investing

More Sucky IPOs

Here is another reason why you seriously can't trust IPOs. You may make a quick buck off the first two days, but in a grand scheme of things, IPOs are hardly investment plays, whether you like it or not.

Here is an extract:

The S-1 filing shows that Groupon had 83m subscribers at the end of March and its revenues rose from a total of $713m in 2010 to $645m in the first quarter of 2011 alone.

Meanwhile, it made a loss according to Generally Accepted Accounting Principles of $390m in 2010 and $103m in the first quarter of 2011.

Do not fear, however, Groupon has worked out a way to smarten up its figures – it has devised its own measure of profitability called “adjusted consolidated segment operating income” or “adjusted CSOI”.

A strong profitable company will still be around 5-10 years from now. It also does not need to make up a way to measure its own profitability. In other words, let the numbers speak for themselves.

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