Well, talk about a surprise you should have expected: Groupon has cancelled its roadshow and is reevaluating its IPO plans due to market volatility, according to the Wall Street Journal.
A Groupon spokesperson declined to comment for this story. Given the company’s experience with criticism from investors and the media ever since it first filed an S1, however, it seems a reasonable guess that a lot more than simple market volatility is going on, particularly as tech companies continue to file IPOs.
Groupon’s creative accounting has been extensive, even in an industry known for no-profit or low-profit companies finding new ways to convince investors why they really should buy stock.
Had the company simply amended its S1 several times to respond to SEC concerns, it might have weathered the storm – or at least minimized the storm damage, given the inordinately high marketing and overhead costs that kept the company losing money like a 1999 pre-bust dotcom star.
But Groupon officials kept pushing the company’s view, trying to counter the negative views. First, chairman Eric Lefkofsky predicted in June that Groupon would be wildly profitable when asked about the company’s heavy losses.
More recently, a leaked memo detailed CEO Andrew Mason’s attack on critics who questioned the company’s operations and future. Mason not only made predictions about the company’s future, but released financial information that wasn’t public (and in one case, not even final).
‘I get the feeling Groupon probably had some concerns over gun jumping,’ says Gene Marbach, group vice president at Makovsky + Company.
‘This is IPO communications 101. If it ain’t in the book, you don’t say it. Better off you keep your mouth shut because you could jeopardize one of the more important events in your corporate history.’
Groupon was embarrassed further by the departure of its PR pro Bradford Williams, an industry veteran who quit after two months on the job. He left right before the memo went public, leading to speculation about a disagreement with management over its publication.
‘The communications guy left after two months,’ Marbach says. ‘He probably threw up his arms and said, These people aren’t paying any attention to me.’
