Foot in Mouth, Groupon Amends IPO
My Name Is Andrew Mason, and I'll Be Here All Week
LivingSocial Takes Groupon Rivalry Overseas
Groupon, an "Unusual" Company, Going Public
Groupon could use one of its own spa deals after what had to have been a tense week at Chicago headquarters.
Stressor No. 1: An Executive Who Reportedly May Have Spoken Out of Turn
After filing for an initial public offering, companies go into quiet periods, in which executives are legally required to zip their lips, period.
Apparently, executive chairman Eric Lefkofsky may not have thought that particular regulation applied to him, as comments attributed to the Groupon cofounder ran in a post-IPO-filing story on Bloomberg.com. Groupon amended its paperwork with the Securities and Exchange Commission Thursday in an attempt to clarify some of those reported remarks.
The statement in question, that “Groupon was going to be wildly profitable,” appeared just a few days after June 2, which was when Groupon filed its S-1 seeking to raise $750 million by going public. If someone as high profile as Lefkofsky—let alone anyone at the company—said something so charged during the quiet period, it could be problematic.
Groupon's attempt at damage control claims that Lefkokfsy “did not agree to be interviewed for the news story and, through representatives, requested that the statement not be published.” The amended filing also notes that the statement does not accurately or completely reflect Lefkofsky’s views, although we bet that it accurately reflects his hopes and dreams.
Stressor No. 2: CEO Andrew Mason's Letter to Shareholders May Have Been Too Prominent and Too Casually Worded
Mason’s unusually humorous letter to shareholders—“Life is too short to be a boring company” is just one outtake—was moved from the beginning of the IPO filing to page 32 and was also tweaked in the amended filing.
As the Los Angeles Times points out, the new language of Mason's letter added a more cautious tone in regards to profits. It now says: "As with any business in a 30-month-old industry, success for our investors is not guaranteed. We have yet to reach sustained profitability, and we have no shortage of competition."
In the amended filing, Groupon names as its competitors Google, Eversave, BuyWithMe, and LivingSocial. Originally, it had cited Facebook, Google, and Microsoft as examples of other large Internet businesses that have launched similar offerings to its own.
The original version read: "As with any business in a 30-month-old industry, the path to success will have twists and turns," and did not include the line about profitability and competition.
Stressor No. 3: Potential Legal Trouble With the State of Connecticut
In Connecticut Thursday, Attorney General George Jepsen said that Groupon’s deals may fall within the definition of gift certificates under state law, and if they do, the company might be violating said laws dictating that gift certificates cannot be sold with expiration dates, as Groupon offers are.
He wrote a letter to Mason asking for specifics about how Groupon deals are sold and redeemed by consumers, how much revenue they generate, and how frequently expiration dates are imposed upon the sale of goods and services at a discount.
"I have not prejudged Groupon or reached any conclusions," Jepsen said in a statement. "I am hopeful that any issues can be resolved through discussion and cooperation."
In a statement cited by Reuters, though, Groupon sounded nonperturbed about the Connecticut case.
"We look forward to cooperating with Connecticut's attorney general in helping him and his team understand our business model as it relates to the many Connecticut merchants and consumers who use our service," a Groupon spokesman wrote in an email to Reuters.
Groupon has faced consumer lawsuits in Minnesota over the same expiration-date issue, and its rival LivingSocial faced the same problem in Seattle. In its IPO filing, Groupon also said that it and several of its merchant partners are defendants in 15 purported class-action suits filed in federal and state courts. Connecticut may be the first state to have a government official raise questions about Groupon sales, though.
Maybe one day at the spa won't be enough.
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Teresa Novellino writes for Portfolio.com
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