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Groupon Could Simply Implode

We have heard speculation that Groupon's finances are on shaky ground before, but it appears that Groupon may be dealing with problems that could cause the startup simply to implode.

For the second quarter, the company posted the third sequential $100 million loss and it is now apparently dealing with a merchant base that is declining. There were 20,233 merchants in Q1 and only 20,041 in Q2. If the trend continues, Groupon's slowing revenue growth could head into negative territory and there is now some concern that the massively funded startup could be out of business with five or six quarters unless it finds a way to profitability or new capital. The company currently has $225 million in cash available, but it owes its merchants $392 million - which is OK, as long as the revenue is growing. If the revenue is declining, Groupon has a serious problem.

In the end, Groupon should have been sold to Google for $6 billion when the deal was on the table. From the opposite view, Google may have been saved from a very expensive venture.