Tags: Groupon | IPO | value | Accounting

Groupon Loses Half Its Value Since IPO on Accounting Concern

Friday, 04 May 2012 06:02 PM

Groupon Inc., the biggest online coupon company, has lost half its value since a November initial public offering amid concern over its ability to translate growth into profit while rectifying accounting missteps.

The company fell 3.3 percent to $9.97, a record low, at the close today in New York. Groupon has slumped 50 percent since its stock-market debut.

Chief Executive Officer Andrew Mason is taking steps to shore up confidence in the company’s ability to account for its business, which centers on the distribution of coupons for discounts on products and services. Groupon in March reported a “material weakness” in financial controls and lower fourth- quarter revenue than previously stated.

“They’re in a penalty box time frame where they need to re-earn investors’ trust because of all the accounting restatements,” said Herman Leung, an analyst at Susquehanna International Group in San Francisco. “They want us to focus on revenue, and then those revenue numbers are the ones that are restated. How can investors be comfortable with that?”

Restatements in the past year underscore the challenges of accounting for a relatively untested business model. Last year, the company abandoned an accounting method for operating income after a review by regulators.

The company also needs to do a better job translating growth into profit, Leung said. Groupon’s $65 million loss in the fourth quarter surpassed the $10.6 million it lost in the previous three months, even as sales rose 14 percent to $492.2 million. The company’s headcount rose to more than 11,000 as of Dec. 31, according to regulatory filings.

‘Multiple Roads’

“With Groupon, there seems to be multiple different roads, and not all of those roads are a steady path for growth,” Leung said. “I know expansion is a key priority, but there’s also doing it the right way, and being more long-term and strategic about how to plan for the growth.”

Groupon said this week it’s adding Daniel Henry, the finance chief of American Express Co., and Robert Bass, a vice chairman of Deloitte LLP, to the board, underscoring a drive to bolster the company’s finance and accounting bona fides.

Julie Mossler, a spokeswoman for Chicago-based Groupon, declined to comment on stock price movements.

The changes announced in March were “primarily related to an increase to the company’s refund reserve accrual,” leading to higher reimbursement rates of more expensive offers, Groupon said at the time. The company also said it’s been working for several months with an accounting firm to remedy internal controls, and will report on the effectiveness of those controls by the end of the year.

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Friday, 04 May 2012 06:02 PM
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