It was ugly today for Groupon Inc. shares: They tumbled 22 percent, shaving off about $1.5 billion in market value. This followed yesterday’s financial report, which showed that rising costs at the online discount company negated the benefit of higher sales.

No matter how you look at Groupon's results, the company continues to burn through tens of millions of dollars in cash. The big blow this time was Groupon’s minority stake in a Chinese competitor called Life Media Ltd., which Groupon deemed to be worthless in the fourth quarter of 2013. The pretax writedown cost Groupon $85.5 million. In the absence of this one-time charge, Groupon says it would have made money in 2013. (As to whether that should count for anything, I defer to my colleague Jonathan Weil.)

Investors seem to be skeptical of Groupon's prospects for two reasons. Maybe that's because this isn’t the first time that it had to endure a big writedown. In 2012, another bad deal in China cost Groupon $50.6 million pretax. Presumably, there is a point past which Groupon can stop losing money on its Chinese investments, but investors might be interpreting the repeated losses as an indication of management’s competence level.

The bigger cause for concern is that operating costs are rising faster than revenue. Groupon sales were $2.57 billion in 2013, up from $2.33 billion in 2012. But the cost of this revenue increased to $1.07 billion, up from $719 million in 2012. That suggests margins would be under pressure even if it weren’t for the misadventure in China.

If there's any good news, it might come in the form of a new platform that lets merchants come to Groupon with deal ideas. That could help reduce Groupon’s sales force and lower costs. Yet the company denies that this is its intention, so the “deal builder” may not be that helpful after all. At the same time, revenue outside of North America fell about 10 percent during the past year, which isn’t encouraging given how much Groupon invests in boosting its presence abroad.

One wonders where Groupon plans to go from here. Its business model is easy to copy, but more important, it’s unclear why any restaurant or other small business would avail itself of Groupon’s marketing services in the first place. I have used Groupon plenty of times at a variety of establishments, but I never was so impressed with what I got at a discount that I wanted to come back and pay full price some other time. A dearth of repeat customers might explain why Groupon’s sales efforts are becoming more costly.

It’s possible that investors and analysts are blowing all of this out of proportion. The latest plunge in the company’s stock brings it back to levels reached in June. That's still triple the price in November 2012. The question is whether investors will ever be willing to buy them for more.

(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter at @M_C_Klein.)

To contact the writer of this article:
Matthew C. Klein at mklein62@bloomberg.net.

To contact the editor responsible for this article:
James Greiff at jgreiff@bloomberg.net.