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Groupon's PR Boss Suddenly Quit After Just Two Months On The Job - Here's Why
- wccrawford 15y agotl;dr - He won't say. Supposedly inside rumors say the place is a PR nightmare.
- mechanical_fish 15y agoI believe they call this kind of summary "burying the lede". Better summary: The communications chief left Groupon just before a "leaked" "internal" memo came out of the company during the SEC quiet period. The implication is that he may have lost an argument with his boss re: the odds of going to jail if that memo was published, and decided to flee the scene of the crime before it went down. [Note I have no idea if these allegations have any merit. I'm just the paraphraser here. Though I'm not a cautious one: the original article tiptoes quite gently around the word crime, but AFAIK that's what it means to violate an SEC rule.]
- archgoon 15y ago>The implication is that he may have lost an argument with his boss re: the odds of going to jail if that memo was published Is jail time a consideration though? It may just result in fines. If anyone can clarify this point it'd be useful.
- _delirium 15y agoI can't find any historical instances of someone being criminally prosecuted for a quiet-period violation. It appears the usual enforcement is to force the IPO to be delayed after resetting the quiet-period clock. Presumably there is some level of shenanigans that'd become criminal, if it violated some other bit of securities law (like deliberately manipulating the stock price, or making knowingly false statements to the SEC), but my non-lawyerly searching doesn't turn up any examples.
- tptacek 15y agoMy limited understanding (after some quick research, and advance warning: reading rule 134 is no help here) is that this is not correct, and that violating the "quiet period" (which is sort of fuzzy compared to other SEC rules) is, like several other rules violations, more of a civil-type issue; fines, recission sales resulting from violation, delay of IPO, lawsuits.
- sunchild 15y agoFraud is still a criminal offense, last time I checked.
- tptacek 15y agoSo is carrying rabid dogs OR corpses in a cab in the City of London. What does that have to do with whether a particular SEC rules violation is a criminal or civil matter? Did you know Google got into the same hot water before their IPO? But because pundits liked Google and don't like Groupon, the ledes on all those stories were "IPO might be delayed", not "founder might go to jail".
- sunchild 15y agoMy point stands on it's own two feet. I never said Groupon was engaged in fraud. I was responding to the parent comment's proposition that criminal behavior is irrelevant to pre-IPO activity. Fraud is a criminal offense, and fraud is defined as "an intentional deception made for personal gain". The point is: Fraud is always a course of action available to the SEC, FTC and AGs.
- tptacek 15y agoNobody made any such "proposition".
- mechanical_fish 15y agoVery good, I stand corrected. Alas, I left the room during the crucial moment when I could correct my comment and now I can't do it. Otherwise I would certainly do so.
- cwp 15y ago"The implication is that he may have lost an argument with his boss re: the odds of going to jail if that memo was published, and decided to flee the scene of the crime before it went down." Why so uncharitable? Resigning, rather than participating in something they believe is wrong, is exactly what people with integrity do. Do we have any reason to believe that the argument wasn't about, say, whether sending the memo violates the spirit of the quiet period? Whether current and future investors would be best-served by the memo becoming public? How to spell "revenue"?
- tptacek 15y agoIt's also the case that at the highest levels of executive decision making, being on the losing side of a major strategic decision often leads to resigning. If you own PR, and the entire PR strategy is overridden by the CEO, you might leave simply because it becomes clear that you can't e effective in that company; the CEO has usurped your role. That's not a value judgement or anything; it's just life in the big city.
- mechanical_fish 15y agoI agree. And the article doesn't suggest that the guy who resigned did anything against the rules; quite the contrary. And, having drunk some more coffee since this morning, I am now sorry that I tried to summarize the article at all. I fear I may have thereby carried water for poorly-sourced rumors that, for all I know, have no basis in fact. I would edit or delete my original comment if I could, but I no longer have the power to do so. I apologize and I promise to try to ignore the Silicon Valley rumor mill even more aggressively in the future.
- deleted 15y ago[deleted]
- carbocation 15y agoThe article being discussed concerns Groupon, not Google :)
- cletus 15y agotl:dr he and Mason didn't see eye to eye. Msson flew by the seat of his pants and did things like send out company memos in what is meant to be the SEC quiet period, against Williams's advice. Honestly, at this point, I'm just wondering how long it'll be before Groupon ends up the subject of Congressional hearings and more ridiculous legislation as the whole thing blows up.
- sunchild 15y agoJust look at the closing comments in Mason's email to "employees": "We are generating cash, not losing it — we generated $25M in cash last quarter alone, adding to the $200M we had before. In other words, we’re doing the opposite of running out of money." Apparently, the opposite of running out of money is holding cash that you owe to others. Very sleazy, IMO.
- tptacek 15y agoHere's the full quote from the memo: P.S.: I almost forgot to address the nonsense about us running out of money in the article above. If you apply the same logic used in the article, you’d have concluded long ago that companies like Amazon and Wal-Mart were running out of cash too. Both have often had payables far in excess of their cash. Finance geeks call this a working capital deficit. It’s normal, manageable and a lot of folks actually believe it’s good thing and would kill to get paid from their customers long before they have to pay their suppliers. We are generating cash, not losing it — we generated $25M in cash last quarter alone, adding to the $200M we had before. In other words, we’re doing the opposite of running out of money. In that light I don't believe either of us is qualified to assess the sleaziness of their cash flow management.
- sunchild 15y agoPrey tell: what does the full quote add? It's still misrepresenting cash flow as revenue, if you ask me.
- tptacek 15y agoSerious question: what do you think the word revenue means?
- diogenescynic 15y agoThe way Groupon defines their 'revenue' is the problem. Groupon uses Gross Revenue Treatment, not net revenue (as eBay does). They include in their revenue the total price of the offering, but they only actually see half of that price. For example, if the coupon is sold for $20, Groupon only actually see $10 of it and they should be accounting their revenue using the $10, not the $20. Imagine how much revenue eBay would have if they counted the total cost of the auction and not just the portion they actually receive? >Groupon accounts for its revenue differently than say eBay, and in a way that some say is misleading to potential investors. The company defines revenue as “the purchase price paid by customers.” Then there’s the issue of “the cost of revenue,” leaving the company with what it calls “gross profit,” which is “the amount of revenue we retain after paying an agreed upon percentage of the purchase price to the featured merchant.” Here’s the thing: Many companies like eBay [...], which also take a fee for transactions, would consider that “gross profit” number a “net revenue number.” UCLA Anderson School’s accounting lecturer Gordon Klein says the S-1 uses terms in a way he’s never used them before, and this unusual accounting tells him that investors should “run from the stock.” : http://goingconcern.com/2011/06/theres-some-fuss-about-groupons-revenue-or-profits-or-something/ http://goingconcern.com/2011/06/theres-some-fuss-about-group... Also, the fact that Groupon delays paying their merchants is what allows them to have an operating cash-flow as they even say in their S-1 filing: Our merchant payment terms and revenue growth have provided us with operating cash flow to fund our working capital needs. Our merchant arrangements are generally structured such that we collect cash up front when our customers purchase Groupons and make payments to our merchants at a subsequent date. >The second issue is that the accumulation of the merchant payable, has resulted in a substantial working capital deficit. Essentially, despite being cash flow positive in the short term, they are not generating enough to cover their operating expenses like the amounts owing to merchants, salaries, rent and other costs of running of the business. As such, without additional financing, they will not be able to meet their obligations. This is extremely serious and which is why many have analyzed Groupon as being on the brink of insolvency: http://www.montrealfinancial.ca/blog/5-notable-disclosures-in-groupons-financial-statements-and-w.html http://www.montrealfinancial.ca/blog/5-notable-disclosures-i...
- dreamdu5t 15y agoClassifying marketing and sales as capital costs tells me everything I need to know about Groupon. Dishonest companies use shady accounting practices. No successful or confident company needs to. It's like if McDonald's used CSOI to classify their employees as capital costs... since you know eventually they'll be replaced by robots anyway.
- dreamdu5t 15y agoWhy is this downvoted? The very definition of a capital cost is a one-time (or mostly one-time) expense. Regardless of whether you expect marketing costs to fall in the future, they are still operating expenses. After all, Groupon can't operate without this expense. If marketing is a capital cost, then everything is, and therefor capital cost becomes a rather useless classification. Let me put it this way: What is an operating expense for Groupon?