Much-hyped online discount service Groupon is getting cold feet about going public, the Wall Street Journal reports.
The company has already reportedly canceled an investor roadshow next week. It “isn’t cancelling its initial public offering, said this person, but is reassessing the timing for an IPO on a week by week basis,” due to stock market voltality The Journal added, citing an anonymous source close to Groupon.
So though the IPO might not be off, it’ll likely at least be delayed from it’s rumored post-Labor Day, September date.
Sure, the market has been especially shaky lately, but that’s still an odd response from a company that was previously gung-ho about its prospects for revenue growth into the future.
The more likely culprit is a leaked memo addressed to Groupon employees by founder and CEO Andew Mason last week, in which he said “Thanks for staying tough, determined, and agile throughout this process. For now we must patiently and silently endure a bit more public criticism as we prepare to birth this IPO baby — a breed for which there are no epidurals. If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.”
The SEC took issue with the memo – which some believe might have been intentionally leaked by Groupon to quell a rising tide of criticism over its accounting practices and the irrefutable fact plaguing Groupon and a number of tech IPOs: no profit – and is reportedly now investigating Groupon for potentially violating the “quiet period” rule prohibiting a company from promoting its stock in advance of an IPO.
Groupon has experienced meteoric growth since its founding in 2008 in one local market, Chicago, expanding to most big American cities and 45 countries internationally and accruing a whopping 115 million users.
In the process, by some measures, Groupon has eclipsed the growth of Google and Facebook.
But it has faced a string of troubles as of late, starting with SEC regulators taking issue with a creative accounting mechanism used to tout the company’s earnings in Groupon’s original pre-IPO S-1 filing, made June 2.
Called “adjusted consolidated segment operating income,” or SCOI, the metric essentially asks “investors to look at their profit before any expenses,” according to one analyst, The Journal reported. The SCOI showed Groupon earning $81.6 million instead of reporting a loss of $98 million by more traditional accounting, based largely on marketing costs.
Groupon dropped that metric from its updated filing on Aug. 10, but then traffic reportedly plummeted by 50 percent in July.
Where the daily deals site goes from here is an open question, but once thing is clear: Groupon’s once seemingly unstoppable ascent seems to have spun wildly out-of-control, and it’ll take significant effort to get it back on course. Stay tuned.
