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LivingSocial's new funding round was provided with "oppressive terms" and arrived with the...

LivingSocial's new funding round was provided with "oppressive terms" and arrived with the company just days away from a Chapter 11 filing, PrivCo reports. The deal reportedly requires Groupon's (GRPN +5.2%) biggest rival to pay double-digit annual dividends, grants liquidation preferences of up to 4x the company's $110M debt load, and is meant to set up a sale by year's end. 29% owner Amazon (AMZN) is said to be among the investors. (Groupon upgrade)
Comments (1)
  • LG1234
    , contributor
    Comments (5) | Send Message
     
    Well, the LS source in the Privco article said he was going to "spin" and he sure did. "So yes we owe local merchants a lot of money, more than our Cash, and these Merchant Payables are most of our Current Liabilities as PrivCo surmised, but I will point out that at least it's not as as great a portion of our Current Liabilities as Groupon's." Except Groupon has $1.2B of cash on hand vs. $800M of payables and is profitable no debt while LS has $76M of cash on hand vs. $300M+ of payables and $200M+ of senior secured debt. So Groupon could write a check tomorrow to all of its merchants for 100 cents on the dollar if it wanted to and will be able to do so for the foreseeable future as long as it continues to be profitable. While in LS's case its almost certain that at some point the musical chairs game will end and merchants will get not just a haircut but zero cents on the dollar. Merchants who understand a balance sheet should run away from LS and/or demand tighter payment terms.
    21 Feb 2013, 10:51 AM Reply Like
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