Recently, people have questioned my motivations around writing about Groupon. They have tried to insinuate that I’m writing about Groupon for personal financial gain.

Anyone who believes that doesn’t know the first thing about how financial markets work. I have largely acted against my own personal financial interests when it comes to Groupon.

The first rule of financial markets when you discover an anomaly that other people haven’t discovered: Don’t talk about it! If you have an informational advantage, it’s best to shut up and rake in the profits.

Here are several ways I could have made more money based on my analysis of Groupon:

  • Not written about it and shorted it the moment I could get my hands on it. At the time Groupon’s S-1 came out, bankers were talking about $30-35 billion valuations for the company. That was dramatically reduced, in part due to my writings. If I were trying to maximize my own gains, I wouldn’t have written about Groupon. That way, Groupon’s valuation would have been higher and I would have had more room to profit from the collapse I knew was coming. Last summer, I spoke at a conference of professional money managers. Several of them agreed that Groupon was a terrible company. But they asked me to stop writing about it because they wanted to maximize their gains when they shorted it.
  • If I were an evil genius, I would have spent last summer touting Groupon. $35 billion? That’s crazy low! Groupon should easily be worth $70 billion! It’s a fantastic company! Look at all the crazy revenue growth! That would have given me even more room for the stock to fall, and I would have made even more money than with the first strategy.
  • Sold my analysis to hedge funds. Hedge funds pay a lot better than media.
  • I could have taken advantage of my knowledge of holes in Groupon’s product lines and built a mediocre technology company to fill a hole. Groupon Scheduler was based on an acquisition. A semi-decent programmer could build a product like that in a few weeks. By filling such a hole, I could have easily cleared $10-$20 million. As far as I can tell, Groupon management is so desperate to look like a technology company instead of a sales company that it will buy anything that remotely looks like one.
As long as I intend to continue to buy puts against Groupon, it’s actually in my financial interests for Groupon’s stock price to go up. The higher Groupon’s stock price is, the cheaper $6 Groupon puts are.

I did none of those things. Instead, I shouted from my platforms in the blogosphere, Twitter, and television that Groupon is a terrible company that is doomed to fail.

There’s only one way in which I’ve paid attention to my incentives: In the midst of all of TechCrunch’s drama, I never wrote about why I don’t write for TechCrunch anymore. There are some people you just don’t mess with in Silicon Valley.


So why didn’t I do the things that were best for me financially? Why did I take all the personal attacks about my competence and motivations? Those are questions I’ve asked myself many times when I’ve been up at 4 a.m. writing a piece about Groupon. I knew I would’ve made a lot more money and incurred a lot less stress if I had just shut up.

Part of the answer is in an email I received yesterday afternoon from a small business asking for advice:

I am a merchant that ran several deals with Groupon and now regret that decision due to the issues I’ve experienced with Grouponers. And these deals resulted in revenue loss in our company.

It is sad to say but we are on the verge of shutting down.

I hear these stories all the time. And it pisses me off that a lot of people at Groupon got rich by screwing over small businesses. (Despite my general negative view of Groupon, I also say nice things when warranted and point out cases where it makes sense for small businesses. I want small businesses to succeed and, in a limited set of circumstances, Groupon is actually a good strategy.)

I’m also concerned about the ecosystem effects of Groupon. It is poisoning the well among small businesses for startups that are trying to do local the right way. Companies like GrubHub, Savored, and HotelTonight are doing the right things. (I have no financial interest in any of them.) Among bigger companies, I believe that Facebook, Twitter, Google, and AmEx can build the products that deliver great value to small businesses. (Disclosure: I have a very tiny stake in AmEx.)

I want these companies to be able to succeed. I was talking to an executive at a company in the local space shortly after Groupon’s earnings restatement. I told him that the folks in Chicago kept pissing in his pool. He responded, “That’s not piss I just saw floating by.”

In any market cycle, whether it is a bubble or a bust, there are good companies and bad companies. Groupon is a spectacularly bad company.

I would hate for other companies that are trying to IPO to be painted with the Groupon brush. On an appearance on CNBC, I was asked what Groupon’s decline means for Facebook’s IPO. I responded that I hoped it meant nothing, because Facebook is a very different company.

In the same interview, I predicted that without fundamental changes to its business model, Groupon’s stock price is going to zero. That was before I held any interest in Groupon. If I were playing to my financial interests, I would have bought puts against Groupon before that appearance.

Although Groupon is the company I’m most closely associated with, I write about plenty of other topics, including many companies in which I have no financial interests. My criteria for what I write about is simple: It has to be interesting to me and it has to be a story where my experience or viewpoint adds value.


I’m passionate about disclosure. Since I started trading in Groupon stock, I’ve disclosed every single trade I’ve made on Twitter. These disclosures are made in near real time. I get the confirmation page from Fidelity and I cut-and-paste the relevant information into Twitter. Periodically, I update this list on my blog. The post with the disclosures is deliberately pinned to the front page of my blog.

When I first started trading in Groupon, I noted this in stories on VentureBeat. That disclosure even prompted a fascinating discussion on Quora about the ethics of my trading in Groupon stock. Ironically, the question was asked by a former Groupon employee who stands to gain financially from getting me to shut up about Groupon.

I soon drifted to other topics and when I returned to Groupon, we forgot to add the disclosures back. That’s a mistake and I apologize for that. We’ll ensure that all posts I do in the future have the disclosures.

My goal is to provide the highest level of disclosure possible. If there were a way for me to post a link that would show my portfolios in real time, I would happily do it. I even disclose my positions in companies that I don’t generally write about. (I currently have short positions in Jive Software, Best Buy, and Shutterfly. I am long Microsoft from my time as an employee there.) I disclose silly bets I have with friends including Semil Shah, Paul Kedrosky, and Felix Salmon.

I haven’t disclosed the number of shares in each trade. Those amounts only make sense if you know my overall net worth. If, hypothetically, I were to say that I made $10,000 buying puts on Groupon stock, it means something completely different if my net worth is $50,000 than if my net worth is $10 million.

If you look back through my writings and media appearances, you’ll see that I’ve generally argued for more disclosure from everybody. I want patent applications to be available instantly and reviewed by the community. I want management Q&A during the roadshow for investors to be made public. I want the quiet period rules eliminated or drastically modified.

The irony for me is that the questions about whether I was being ethical in my writings about Groupon only became an issue because I disclosed what I was doing. No one went digging into my financial records and discovered something I was trying to hide. I put it all out there.

Before I started trading in Groupon, I had critics telling me to put my money where my mouth is. “Put up or shut up.” So I did.

To those people, I have one thing to say: “Thank you!” Buying puts against Groupon has been a fantastic bet.