23 Comments

Summary:

Looks like Groupon will go public on Friday morning at $20 per share, giving it a valuation of $12.6 billion for its online coupon business. Let’s compare it to some of the greentech startups and big energy firms and try not to get disturbed.

angrymarshmellow

Looks like Groupon will go public on Friday morning at $20 per share, giving it a valuation of $12.6 billion for its online coupon business. That seems crazy high for a company with a massive amount of competitors and potentially questionable recurring value for small businesses (though what do I know? I write about energy). But I thought we could take that company’s valuation and compare it to some of the greentech startups and some of the big energy and oil incumbents.

Greentech startups

  • Fuel cell maker Bloom Energy is reportedly valued at almost $3 billion — a fourth of what Groupon is worth. (Fun tip: The NEA is a major investor in both.) Bloom Energy is trying to sell distributed cleaner power to companies and utilities.
  • Electric car maker Fisker is reportedly valued at $2.2 billion, and Tesla Motors has a current market cap of $3.38 billion. So they have almost a sixth of the valuation and close to a fourth of the valuation, respectively, of Groupon.
  • Public biofuel company Kior has a market cap of $1.63 billion, almost an eighth of the valuation of Groupon. Kior is making a biocrude from plant waste and energy crops using a technique from the oil industry.
  • Algae oil company Solazyme has a market cap of about $550 million. I’m not even going to do this math comparing it to Groupon because it makes me sad.

Things that have bigger market caps than Groupon: oil companies, conglomerates, big auto, big Internet

  • Oil behemoth Exxon Mobile has a market cap of $377.98 billion, 30 times the size of Groupon’s market cap.
  • Google has a market cap of $193.52 billion, 15 times the size of Groupon’s.
  • GE has a market cap of $176.37 billion, about 14 times Groupon’s.
  • General Motors has a market cap of $37.53 billion, just three times the size of Groupon’s.
  • Building automation giant Honeywell has a market cap of $41.72 billion, or three times the size of Groupon’s.
  • Chemical giant Dow Chemical has a market cap of $32.98 billion, about two and half times larger than Groupon’s.

Big energy, utility

  • Power company Duke Energy has a market cap of $27.71 billion, about double the size of Groupon’s.
  • NRG Energy, which has invested a lot in clean power, has a market cap of $5.23 billion. Groupon’s market cap is over double that (getting disturbing).
  • Itron is one of the largest smart meter makers in the U.S. It has a market cap of $1.56 billion, or an eighth of Groupon’s (ouch).

Image courtesy of Futurilla

  1. I found a site where you can get coupons for restaurant called Printapons they are on all over the news, search online

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  2. Comparing these numbers looks like easy fun, but this exercise lacks meaning without looking at the numbers behind the numbers and the individual reasons for every decision and their circumstances.

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    1. Douglas Crets Friday, November 4, 2011

      IT also is an exercise in futility since if you look at a sector like energy, natural resources on their own have a particular value that is assessed and acted upon in ways that no coupon would be. Not sure why this comparison is even being made, with all due respect.

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  3. Haunted sheep Friday, November 4, 2011

    I like your site and it’s content, but this entire article is nothing. It liberal whining. Please stay out I the politics and stick to more informative subjects.

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    1. there’s not a shred of politics in this story

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      1. Comparing market caps of completely unrelated industries. Usually done by rank amateurs or people trying to make some kind of political point. Which one are you? ps. Are your greentech companies turning a profit? That sometimes help increase valuations. Just a thought.

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      2. Michael Tupper Friday, November 4, 2011

        @ Peter Mullen, FYI: Groupon has yet to turn a profit and is burning $130M a quarter.

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  4. I dont understand why its confusing or sad that these other companies are worth less. Its simple economics. Just because cleaner energy is a good idea, it doesnt make it automatically a great product, nor economical. Unless cleaner energy is cleaner than current options, its not practical.

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  5. What is the relevance here?

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  6. Groupon China will fail – it’s only a matter of time. From the day Groupon entered China, it has been a bumpy road — one that now appears to be approaching cliff’s edge.

    Some analysts say this is the result of Groupon’s overly confident business model. Others say that its failure can be traced to the nature of China’s group-buying industry: with the market already divided among so many companies, even a company as successful elsewhere as Groupon can find its impact limited. No matter which view one ultimately subscribes to, what’s becoming increasingly clear is that Groupon is finding narrowing space for itself in China’s crowded group-buying industry. http://www.penn-olson.com/2011/11/04/4-mistakes-behind-groupon%E2%80%99s-failure-in-china/

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  7. Katie, what’s your point? Are you saying that companies like Bloom and KiOR should be worth even more? Take a look at what Robert Rapier had to say about KiOR:

    “Why I Didn’t Short KiOR” http://www.consumerenergyreport.com/2011/10/17/why-i-didnt-short-kior/

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  8. @fmazzola, The relevance is valuations. An online coupon business is valued over double a company that is leading trying to get the U.S. to use more clean power and move away from fossil fuels. Shows the state of the markets.

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  9. Shows the markets would like to see a return on their investment. Novel I would say.

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    1. Michael Tupper Friday, November 4, 2011

      Allan,
      I don’t disagree with you… this is obvious and the only pure motivator. Very few will invest in something because “it is a moral decision” if it doesn’t produce a return.

      But at the same time, I found value in Katie’s observations in the sense that the markets are screwed up enough to the point where things that contribute relatively low value to society can produce awesome returns for investors, especially short-term speculators, as opposed to companies that are building truly compelling technologies and products. I think it is this disconnect that is at the foundation of our current and future economic peril.

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      1. The markets are not screwed up, they just “are”. You see them as “screwed up” because resources are not being allocated in a way that you want them to be.

        I agree this may be to our peril, but with taxpayers looking at massive green-tech failures like Solyndra and Beacon, it is going to be much more difficult to get investors to put their hard earned savings on the line for the public good.

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      2. Tupper, get a clue. The article is pitiful.

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  10. I totally agree: it is absolutely tragic that the market is not more receptive to cleantech (I’ll skip my energy innovation funding rant for now) but I’m not sure how market cap–and for an over-valued IPO that has yet to spend a full day on the trading floor–is necessarily representative of this. Are you saying that since market cap is an indicator of perceived PV of future CFs, this points to the sad state of cleantech investment? I agree with that, but I don’t see Groupon making that case for you: is the capital structure or market reach of a Groupon vs a Fisker really comparable?

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  11. I agree with yalls that say this is simplistic. It is, and not necessarily apples to apples. But I think it’s still interesting and an indicator of how investors/capitalism values things.

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  12. Katie has it right. Not just necessarily from a ‘green-tech’ perspective but the valuations in general. Companies like Honeywell, GE, Dow Chemical, etc. provide so much more value to our economy. From a research, innovation, employment, and economic multiplier effect, Groupon can not even come close. Many could start up an internet based company that provides lower prices for bargain hunting consumers. Few can R&D, design and manufacture new innovative products that will better society by keeping us warmer, protecting us, or solving our energy crisis – much more important issues than getting your sushi for ten bucks less. It makes me sad too Katie – great article.

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    1. Michael Tupper Friday, November 4, 2011

      Here here.

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  13. Michael Tupper Friday, November 4, 2011

    Katie,
    I applaud you for making this observation. I think it is a telling sign of something that has been on my mind for some time and it has to do with the irrational and disparate valuations within some of the different industries.

    While I definitely think Groupon is highly overvalued, it might not look that way from their financials and I am nonetheless sure they can make an interesting profit over the next couple of years. However, they seem like an extremely volatile company. I wouldn’t be surprised to see their meteoric rise matched by a catastrophic fall and disappearance akin to something like MySapce.

    But the stuff that has been weighing on my mind is another facet to all of this and something I think you make more evident in your post. I think the core factor that has put our country and economy in the situation it is (of course, apart from the poor management of the Bush administration, the wars and the lack of oversight and regulation leading us to the sub-prime crisis), is our hunger for cheap over and above our hunger for buying “Made in America” and the correlation and perception that “Made in America” was synonymous with quality.

    It is astounding to me that Groupon is worth more than Tesla, a company that has great proprietary technology, makes a real product in a factory, has 6000 paid pre-orders for their next model car, et al. Or that it could be valued at 30-40% of companies like GM, Honeywell or Dow Chemical seems incomprehensible. These companies actually make things as opposed to simply brokering a product or service. I can’t see how Groupon has a long-term sustainable business advantage– as soon as the small retailers find another effective way of funneling customers to their cash registers, Groupon could evaporate practically overnight. This could come in the form of a formidable competitor like Google, Facebook, LivingSocial, etc. or in a new format/technology that has yet to be created.

    Overall, I think this article points out an underlying fundamental, beyond that of Groupon itself, and that is the irrational valuations taking place in the market and our need to resume a leadership position as a leader in genuine innovation and technology production and manufacturing.

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  14. Katie, It doesn’t have to be this way, this could be actually a win-win situation. Combine the two and have Groupon aggregating Solar and installation purchases for home-buyers/businesses. Solar is relatively cheap now, but installation is still quite expensive getting discounts will go a long way to assist both ends, customers and manufacturers.

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  15. Don’t count you eggs before they hatch, Groupon may have had a successful IPO, but if their business execution is poor as it has been and they have a lot of competitors, you could see them “Myspaced” in a bit

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