China has certainly been a big driver for American businesses like Coca-Cola
(NYSE: KO ) and Proctor & Gamble (NYSE: PG ). Then again, those companies have
spent decades making the necessary painstaking investments. As for the dot-coms,
however, China is proving to be an impossible dream. Just look at Google
(Nasdaq: GOOG ). Despite its firepower, it has essentially abandoned the
country. But this isn't stopping many entrepreneurs from trying. In the case
of three-year-old Groupon, there has been a big push into China and has become
a key part of its growth strategy. According to the Wall Street Journal , the
results have been a mess. At the core is Groupon's Gaopeng.com, which has the
backing of China's Tencent Holdings and Yunfeng Capital (which is the private
equity firm of Alibaba's Jack Ma). Even with this support, it looks like
Groupon has shut down 10 offices and has slashed the headcount. So what's the
problem? In a country where there are fake Apple (Nasdaq: AAPL ) stores, there
are many hungry entrepreneurs who waste little time making knockoffs. And China
already has thousands of daily-deal sites. Keep in mind that one of the rivals
actually owns Groupon.cn, which is getting more traffic than Groupon's
Gaopeng.com. This latest fiasco is another ding for Groupon's planned IPO. It
was just a few weeks ago when the company filed its latest S-1that purged the
use of fancy accounting metrics, which had inflated its financials.
Unfortunately, the fact is that Groupon continues to lose huge amounts of money
(the latest quarter saw a $100 million loss). There has also been a slowdown in
the top-line growth rate. In light of all this, the prospects for the Groupon
IPO are definitely getting dimmer. The company is still likely to get the deal
done, but I'd expect we'll see a generous discount on the valuation. Tom
Taulli is the author of various books, including " All About Commodities ."
He does not own a position in any of the stocks named here.
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