This will be one of my shortest posts ever:

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Anyone who is thinking of purchasing Groupon today, when the company goes public, is insane. You have already forgotten 1999.

This company has the weakest moat I have ever witnessed in a new IPO. There are absolutely no barriers to entry, and any high school kid with a computer can easily replicate the business model. In fact, I know someone who graduated from high school a few years ago (never went to college and had no connections) who recently created a very similar product to Groupon, albeit to a much more niche market. There are tens of thousands of subscribers already.

Facebook is already getting into the action, and I expect Google to get in very shortly. Google and Facebook have a lot more money and resources to easily take away market share from Groupon. It also would not hurt their core business, even if they were unsuccessful in their respective endeavors.

The SEC has already flagged the company for making up totally ludicrous non-GAAP measures to make the company seem profitable. ValueWalk contributor Ben Strubel of http://strubelim.com/wp/, was one of the first to write about this, and got the attention of the WSJ, and finally the SEC.

Why hasn't the SEC stopped the actual IPO? Ask the victims of Bernie Madoff, MF and reverse Chinese RTOs; the SEC is always late to the ballgame.

The fact that the founders have already sold a chunk of stock prior to the IPO is another issue that should concern any rational investor.

Assuming the projections are correct (which are highly doubtful), the IPO is pricing at 11x EBITDA, and FX P/S 2012.

The company is keeping the moat extraordinarily small to try to create a supply/demand imbalance and boost the price of the stock.

Why is anyone paying such a high premium for such a low quality business with untrustworthy management? Just look back to the tech bubble and the frenzy that went on there.

Groupon could be the next IBM or Facebook. There is always that one in a million company. But since a child can replicate Groupon's business model with almost zero investment or skill, I find it highly unlikely.

Once a few documents come out from the SEC and I can look deeper into possible future shenanigans, I would consider this as a possible short.

Disclosure: No position

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