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LivingSocial's Coupon is Set to be Punched by Amazon

NEW YORK (The Deal) -- With Amazon.com (AMZN) writing down its investment in LivingSocial to nothing, the future of yet another social media startup is very much in doubt. While the company insists it will soldier on, sources said it's more likely to end up absorbed by the online retail giant.

John Bax, the CFO of the Washington-based company said LivingSocial's board has elected to re-invest $260 million it recently reaped selling Korean e-commerce company TicketMonster to competitor Groupon (GRPN).

Bax also insisted that cash received for the sale of Groupon shares that LivingSocial picked up as part of the TicketMonster transaction were likewise going back into the company.


WATCH: Amazon Downgrades Investment in LivingSocial

The company's revenue fell to $399 million in 2013 from $455 million in 2012, and it lost over $180 million last year, according to a regulatory filing from Amazon.

Granted, it had lost $653 million the year before, but it had also dumped TicketMonster -- at a loss, since it had acquired it for a reported $350 million.

Amazon also said, in the same filing, that its "investment in LivingSocial has been reduced to zero due to our recognition of equity-method losses."

That's quite a comedown for a company that, in rosier times, reportedly valued itself at up to $15 billion, chatting up bankers for an initial public offering to follow Groupon's 2011 debut and raising hundreds of millions of dollars.

Despite Bax's insistence that LivingSocial was focused on the future, the CFO acknowledged that Amazon was a "likely" acquirer of the company, specifically noting that Jeff Bezos' company "has an interest in [LivingSocial's] local offers" business. So despite those continuing losses, LivingSocial is hoping that a right-sized business will soon turn a profit.

Along with its ownership of TicketMonster, LivingSocial's events business is no more.

Back in February 2013, LivingSocial had to fight off what it characterized as an inaccurate report regarding its last $110 million round -- the company raised a little under $1 billion -- after financial data site PrivCo reported the startup needed to secure emergency debt to stave off failure.

CEO and co-founder Tim O'Shaughnessy acknowledged the company raised "a down round, which I'm sure is not a shock to anyone," but didn't offer any clarity into the nature of the funding, other than to say "we hope to turn the corner to become profitable soon" and acknowledging "there were some bells and whistles" that came along with the round.

Bax said the comment about "bells and whistles," did not entitle Amazon, which led the last fundraising round, to anything specifically pertaining to M&A. But sources said that Amazon is the only potential buyer of LivingSocial's assets.

O'Shaughnessy said last month he would step down from his CEO role as soon as his replacement is found.

When O'Shaughnessy sought to quell questions over his company's future last February with a well-publicized staff memo, he stated, "we sold 7.5% of the company for $110" million, adding "this should give you some idea of the current valuation of the company."

That appeared to give the company a valuation of nearly $1.5 billion.

That was in stark contrast to Amazon, which said in a regulatory filing at the end of March that it valued its 31% stake at $36 million.

To be certain, LivingSocial hasn't been the only e-commerce startup to stumble upon hard times.

For instance, ideeli, another online retailer, sold to Groupon recently for substantially less cash than it raised.

Amazon declined to answer when a request for comment was sent to the company and Amazon and, separately, to Bezos.

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