brucekrasting.com / By Bruce Krasting / March 1, 2013
I wrote about the Groupon IPO the day before the company listed the stock LINK. I play in most IPOs and Secondaries. I got the prospective for the GRPN deal, looked it over and concluded it was a junk deal. I got an allotment of shares in the IPO and sold them 15 seconds after the shares opened for trading. I’m one of the very few who has made a buck on the long side of this dog.
Morgan Stanley brought this deal to the street. I think MS did a terrible job of due diligence. If a guy like me who is sitting on the outside of the deal could figure that GRPN was a loser, then you can be damn sure the folks wearing the white spats at MS new it was crap as well.
The article I wrote back in November likened the GRPN IPO to a deal that I had worked on years before. I was tasked with arranging the funding for a fat rendering plant in Mexico. My description:
The plan called for trainloads of cow guts to arrive at the new factory every day. The trains would come from all over Mexico and suffer delays. The thought of train cars filled with guts sitting on some side rail for a week or two put a taint on the deal.
The lawyers tried to dress up the documents. The words “Cow guts” were deleted and the word “Offal was” inserted.
The deal quickly got nicknamed the Offal Deal. From there, some smart guy renamed it again as the Awful Deal. That name stuck.
MS has brought us another Awful Deal, basically MS sold Offal to the public. My closing thoughts on the night before the GRPN deal:
For the folks at MS this was their awful deal. It might prove to be the same for investors.