Paul Kedrosky: Is Groupon's Rapid Growth Proof of a Second Tech Bubble?
Paul Kedrosky, author of one of the world's most popular financial blogs, appeared on Bloomberg recently to separate the hype from the reality surrounding Groupon, the online coupon service that just teamed up with location-based social network, Foursquare. With his signature wit, the trusted investor explained how the union was a natural move for the two companies, but also raised flags about Groupon's own valuation metrics which tailor company expenses traditionally calculated at $387 million to a more investor-friendly sounding $81.6 million. “In certain circumstances it makes sense to use things other than revenue and earnings to value companies. The trouble is when you start getting too far away from that,” says Kedrosky, “It's almost abstract art as pro forma accounting.”
That's not to say Kedrosky is all doom-and-gloom about the entire tech sector, around which rumblings of a 1990s-style tech bubble repeat have never been louder. He contends, in another Bloomberg interview from earlier in the month, that “it's so early in the game that it's hardly worth using even a small-b bubble. Maybe a 6-point bubble.” Kedrosky, however, remains tough in his judgment of Groupon, which he says, in his typically funny, yet informative tone, has an “effervescent faith in their own non-sensical business model. ”He adds that the company represents an anomaly, not a barometric reading of the tech industry, which will chug along even if Groupon collapses following its pending IPO. “It's going to get shrugged off, [but] it's not going to stop the flow.”
A brilliant economist, armed with a frank disposition, a dazzlingly large vocabulary, and an ability to both entertain and enlighten, Kedrosky is the kind of jargon-free expert you could envision have an engaging chat with over a coffee. His wit and deeply authoritative and customizable keynotes apply to any number of fields driving the economy: energy, tech and finance, venture capital, consumer behavior. He details specifics in each sector but also traces the messy, important points in which they overlap and co-mingle. As seen in the videos above, Kedrosky doesn't shy away from sharing where he thinks the economy is heading and what we should know going forward.
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