It's not running on fumes. It would have been more accurate to say that it is growing more slowly (and as of the last few quarters, has seen its growth flat-line).
2012: $2.33b in sales
2013: $2.57b in sales
2014: $3.19b in sales
Their biggest problem is the inability to achieve profitability on $3 billion in sales after so many years in business. They still have $1.1 billion in cash however, and have reduced their bleed rate to a benign level.
> Their biggest problem is the inability to achieve profitability on $3 billion in sales after so many years in business. They still have $1.1 billion in cash however
Doesn't this just mean the investors would be better off winding it down and investing the $1.1b in something that is profitable, or at the very least has a higher ceiling? It doesn't seem all that likely that the latest round of cutbacks is going to turn this into a profitable company and even if it does, the scope for profits is very limited. As you say, they've been going for a long time and nothing is really getting better. Even the 2.5% you get from the S&P 500 would be a better use for that billion in cash.
By virtue of the way indices work, a lot of public companies in general would have been better off throwing their cash in index-driven mutual funds. That being said, if it were easy to tell ahead of time which these companies are, it would be easy as an investor to beat index-driven mutual funds.
Right. That's why I suggested Groupon be wound down, not that they continue operating at a loss but invest their cash differently.
This does raise an interesting question, though. There seem to be a lot of corporations out there that have no obvious reason for existing: minimal to negative profitability on a sustained basis, uninspiring business with little potential, and a long track record that doesn't suggest a turnaround is likely. Groupon is just one of many. Presumably in many cases, equity in these corporations is held primarily or even entirely by index funds. Why should such a company remain in business? By definition, if all your shareholders are indexers, there is not a single person alive who considers you an above-average investment. In a rational market, such a company would be wound down or the price of its shares would fall so low that it would be taken over by someone who believes he can do better. But the index funds create a sort of circular reasoning, or perhaps an isolated reality separated from outside feedback, allowing these zombies to keep living. A variant of this was covered by http://www.bloombergview.com/articles/2015-07-22/index-funds..., but this seems like a more extreme case. Of course, Groupon's "institutional ownership", which includes various active and passive funds, pensions, endowments, etc. is only 65% per Google Finance. There are corporations with 100% and even >100% institutional ownership (i.e., there are a lot of non-institutional shorts). Why do they continue to exist, and what can be done to kill them off?
2012: $2.33b in sales
2013: $2.57b in sales
2014: $3.19b in sales
Their biggest problem is the inability to achieve profitability on $3 billion in sales after so many years in business. They still have $1.1 billion in cash however, and have reduced their bleed rate to a benign level.