The window is shut
“LivingSocial’s window of opportunity for going public is long past — they should have gone public probably before Groupon, and taken advantage of that window in which there was uncertainty, and hope, and hype, as a result,” says Mulpuru. “That’s long past and having an events management space is not something that’s going to give them any insulation from being lumped in with the daily deal space. The daily deal space is not where you want to be right now,” she adds.
The endgame for LivingSocial probably lies somewhere between the PrivCo and O’Shaughnessy’s assessment. An IPO is certainly out of the question, while I don’t think one can rule bankruptcy out. However, it’s also possible that LivingSocial could be acquired or it restructures in order to continue as an independent going concern.
One veteran’s view
As CEO and then-chairman of VerticalNet from 1997 to 2001, a host of business-to-business trading platforms, D.C.-based technology executive and investor Mark Walsh has seen this movie before. Walsh led a company that experienced hypergrowth, as well as investors’ adulation and, later, repudiation. Founded in 1995, VerticalNet grew to 3,000 employees at its peak, with a valuation that went from $8 million to $13 billion in a period of roughly two years.
While he and O’Shaughnessy are currently co-investors and advisors to a start-up company, Walsh is careful to emphasize that he has not discussed LivingSocial’s fortunes with him. Nonetheless, he thinks the young entrepreneur may ultimately face a difficult decision:
If he sticks to his knitting and there ends up being two or three winners, Groupon, LivingSocial, maybe one other and the business stabilizes as a way for healthy vendors to find new customers on a regular or seasonal basis, [LivingSocial] could be a great business. Or he may say: “I’m going to jump off this island and swim to this bigger island,” which is trying to make a business out of the data I have, out of the vertical relationships I can carve up and try to get into some higher-margin businesses that aren’t so discount-driven. I would argue that, at some point, he’s going to have to choose one or the other.
O’Shaughnessy and his co-founders have twice demonstrated they were capable of jumping from one island to another larger, seemingly more attractive island. In the immediate future, however, it appears that time is running short for the company to achieve stable profits and, for the first time in its existence, LivingSocial’s executive team needs to prove that it can see the company though a slimming regimen, instead of managing a Hungry Machine.
The article LivingSocial: A Growth Misunderstanding originally appeared on Fool.com and is written by Alex Dumortier, CFA.
Fool contributor Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN), Google, and Priceline.com Inc (NASDAQ:PCLN). The Motley Fool owns shares of Amazon.com, Google, and Priceline.
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