Even though Groupon was one of the sole pioneers when it came to providing a way for companies to provide discounts over the Internet, even when others jumped on the discount bandwagon – Groupon’s brand seemed to remain intact.
So, it wasn’t that much of a shock in early June when Groupon announced their decision to go forward with a highly anticipated initial public offering (IPO) that would be finalized in late September. Unfortunately, for the discount brand – that wasn’t to be the case. Especially, since the company recently released a statement saying that they were postponing the IPO due to the market downturn and concerns brought forth by the Securities and Exchange Commission.
While some companies such as LinkedIn and Zillow have had shaky IPO starts, others like the music company Pandora have had it relatively easy – leaving some to wonder – is Groupon’s hesitation a sign of a bigger issue?
After all, the company’s missteps have been well known and documented since the awkward-bordering-on-insensitive advertisement that was broadcasted during the Superbowl. Outside of that, the company has also come under fire for its unusual accounting metric, the Adjusted Consolidated Segment Operating Income, which is seen as an unfair to measure their financial worth. Which, the SEC asked them promptly to remove prior to the company submitting their IPO application.
On top of that, the high marketing costs coupled with their unprofitable business model have potential investors raising their eyebrows. Although, some view Groupon’s business model as unreliable – it didn’t help that soon after, a memo penned by CEO Andrew Mason for his employees was “leaked” to the masses, which many saw as a violation of the SEC’s silent period mandate.
Surprisingly, it still wasn’t the first time Groupon had come close to breaking the quiet period rules. Especially, since the day after the company filed for the IPO, Groupon’s chairman and one of its biggest investors, Eric Lefkofsky, told Bloomberg that the daily-deal company was going t be “wildly profitable,” once the company officially went public.
Although, Groupon has yet to come out defending their case and with no apparent signs of road show on the horizon – it is hard to estimate how long it will be before the public hears Groupon’s take on the situation. In the meantime, it hasn’t been determined what effects this will have (if any) on investors when Groupon decides to eventually move forward with its IPO process. Either way, they are slowly emerging as a poster child for burgeoning entrepreneurs by showcasing the best way not to go public.
Cynthia Wright is an avid lover of all things geeky. When she isn’t freelancing, she can be found on her blog BGA Life and on Twitter at @cynisright.