6 ms·

Groupon Restates Results, Reveals Weak Controls

73 points by jayzee 15y ago

joezydeco 15y ago
So the underwriters have no accountability in any of this? Not a single mention of them in the article, go figure.
moreorless 15y ago
Groupon seems to have a history of questionable bookkeeping. HN community saw this( http://news.ycombinator.com/item?id=3270165 http://news.ycombinator.com/item?id=3270165) way back when. Edit: Added link to previous GRPN discussion
- byrneseyeview 15y ago
  There were some questions about Groupon's accounting in the past, but the numbers Groupon initially released were actually a) more conservative, and b) harder to game, than the numbers they ended up using. Their current financial statements are confusing in part because their customer acquisition costs are so volatile; when they showed operating income excluding that number, it was way easier to see how fast the underlying business was growing.
awakeasleep 15y ago
Wow this surely signals the end of GroupOn. What a stupid company. They are a big joke and nothing they do is right. This is literally an unheard of mistake... no other company has done anything like this (and survived). Why anyone ever invested here, why I didn't think fthe stupid idea first, I'll never know
deleted 15y ago
[deleted]
jcampbell1 15y ago
Groupon needs a controller's office with some self respect. What is this bullshit quote by the CFO: "We remain confident in the fundamentals of our business"? That is not your job. You work for me as the shareholder, and your job is to get the fucking numbers right. Because finance and accounting functions both fall under the CFO causes many CFO's to forget that they are supposed to behave as controllers much of the time.
- runako 15y ago
  > We remain confident in the fundamentals of our business That verbiage sounds like it could have been taken from any of RIM's recent releases, which means it could probably be used as an anti-indicator of the company's fundamentals.
- eli_gottlieb 15y ago
  Oh please. Why the hell did you ever think their business could work in the first place?
knowsnothing613 15y ago
My accounting buddy says 'Material Weakness' is code for accounting fraud. If so, it explains why Andrew Mason and Eric Lefkofsky massively cashed out pre-IPO, and may have left everyone else holding the bag.
- tyrelb 15y ago
  I'm an accountant. And it is fraud. Andrew Mason is basically a newer version of Bernie Madoff. Except Andrew publicly runs a ponzi scheme... AND overinflates share valuation to pump & dump his shares. LOL. If he and his CFO aren't in jail over this... I don't know what! There goes investor confidence... f me!
- joezydeco 15y ago
  Hey, everyone got a Starbelly t-shirt out of the deal...
tatsuke95 15y ago
"The fastest growing company ever" can't get its book right? Shocking.
tyrelb 15y ago
Why is no one calling this out as FRAUD? They clearly and intentionally inflated results... a 200% difference off net income. Why is the SEC and FBI not investigating? And why are there no class-action lawsuits coming together already?
- tyrelb 15y ago
  Actually, there are class action lawsuits starting: http://www.marketwatch.com/story/hagens-berman-investigates-groupon-following-restatement-of-financial-results-and-admitted-material-weakness-of-its-internal-controls-2012-03-30 http://www.marketwatch.com/story/hagens-berman-investigates-...
  - tyrelb 15y ago
    And ANOTHER class action coming together: http://www.digitaljournal.com/pr/646802 http://www.digitaljournal.com/pr/646802
- byrneseyeview 15y ago
  Because the nature of the restatement is that they got more product returns than they expected, so they had to change some accounting policies to account for that. This doesn't affect cashflow, so it has minimal bearing on the odds that they're going under.
AznHisoka 15y ago
"Groupon has become a bellwether for a new generation of technology companies that, using technology, are able to build massive scale over short periods" If by technology, you mean lots of venture capital, and lots of money to throw at Facebook ads + Adwords...
anigbrowl 15y ago
Groupon's stumbles come as Congress advanced a bill, known as the Jobs Act, that would ease the regulatory burdens on fast-growing businesses. Under the act, Groupon, which has less than $1 billion revenue, would qualify as an emerging growth company, entitled to immunity from annual audits of internal accounting controls. The Jobs Act would loosen Groupon's duties "over exactly the type of controls that it was deficient in," said John Coffee, a law professor at Columbia University. Hm. I like the idea of easing the regulatory burden on emerging business, but anything with under $1 billion in revenue? That leaves room for a multitude of sins.
byrneseyeview 15y ago
Guys. This is bad news. But it's a tiny, transient issue, which they've already corrected. If you're serious about considering this evidence of fraud, it would be great to get an idea of how much you've shorted since the story came out (or plan on shorting Monday morning). Groupon's stock is down about 6% after this story, and I don't see any comments that indicate that this raises the odds that Groupon will collapse by a mere 6%. While there are lots of flaws with Groupon's current model, it's not very nice to jump on them for comparatively minor stuff like this.
- prodigal_erik 15y ago
  Apparently there were investors who wanted to after the IPO, but chose not to simply because there were too many others looking for shares to borrow. Has shorting GRPN become less expensive and risky between then and now? http://www.bloomberg.com/news/2011-11-10/groupon-stock-among-most-expensive-to-short-data-explorers-says.html http://www.bloomberg.com/news/2011-11-10/groupon-stock-among...
pbreit 15y ago
This will probably fall on deaf ears because HNers love to hate Groupon but does anyone here realize how difficult it is to account for financials that went from $14 million to $300 million to $1.6 billion over 2 years (with a great deal of it from very recent international acquisitions)?
- maukdaddy 15y ago
  Oh come on. There is absolutely no excuse for fucking up accounting and numbers like this. There are more than enough smart finance MBAs walking around Chicago that could handle the job. This is just further evidence of a company culture that is willing to play fast and loose, and do whatever it takes to make themselves look good despite terrible financials. Remember the rediculous metrics they created to hide their real numbers before the IPO?
- sliverstorm 15y ago
  If you've got $1.6B on the books, I would hope you could afford the talent to manage those books.
eli_gottlieb 15y ago
And the bubble pops!

73 points by jayzee 15y ago

So the underwriters have no accountability in any of this? Not a single mention of them in the article, go figure.

Groupon seems to have a history of questionable bookkeeping. HN community saw this( http://news.ycombinator.com/item?id=3270165 http://news.ycombinator.com/item?id=3270165) way back when. Edit: Added link to previous GRPN discussion

byrneseyeview 15y ago
There were some questions about Groupon's accounting in the past, but the numbers Groupon initially released were actually a) more conservative, and b) harder to game, than the numbers they ended up using. Their current financial statements are confusing in part because their customer acquisition costs are so volatile; when they showed operating income excluding that number, it was way easier to see how fast the underlying business was growing.

awakeasleep 15y ago

Wow this surely signals the end of GroupOn. What a stupid company. They are a big joke and nothing they do is right. This is literally an unheard of mistake... no other company has done anything like this (and survived). Why anyone ever invested here, why I didn't think fthe stupid idea first, I'll never know

deleted 15y ago

[deleted]

jcampbell1 15y ago

Groupon needs a controller's office with some self respect. What is this bullshit quote by the CFO: "We remain confident in the fundamentals of our business"? That is not your job. You work for me as the shareholder, and your job is to get the fucking numbers right. Because finance and accounting functions both fall under the CFO causes many CFO's to forget that they are supposed to behave as controllers much of the time.

runako 15y ago
> We remain confident in the fundamentals of our business That verbiage sounds like it could have been taken from any of RIM's recent releases, which means it could probably be used as an anti-indicator of the company's fundamentals.
eli_gottlieb 15y ago
Oh please. Why the hell did you ever think their business could work in the first place?

knowsnothing613 15y ago

My accounting buddy says 'Material Weakness' is code for accounting fraud. If so, it explains why Andrew Mason and Eric Lefkofsky massively cashed out pre-IPO, and may have left everyone else holding the bag.

tyrelb 15y ago
I'm an accountant. And it is fraud. Andrew Mason is basically a newer version of Bernie Madoff. Except Andrew publicly runs a ponzi scheme... AND overinflates share valuation to pump & dump his shares. LOL. If he and his CFO aren't in jail over this... I don't know what! There goes investor confidence... f me!
joezydeco 15y ago
Hey, everyone got a Starbelly t-shirt out of the deal...

tatsuke95 15y ago

"The fastest growing company ever" can't get its book right? Shocking.

tyrelb 15y ago

Why is no one calling this out as FRAUD? They clearly and intentionally inflated results... a 200% difference off net income. Why is the SEC and FBI not investigating? And why are there no class-action lawsuits coming together already?

tyrelb 15y ago
Actually, there are class action lawsuits starting: http://www.marketwatch.com/story/hagens-berman-investigates-groupon-following-restatement-of-financial-results-and-admitted-material-weakness-of-its-internal-controls-2012-03-30 http://www.marketwatch.com/story/hagens-berman-investigates-...
- tyrelb 15y ago
  And ANOTHER class action coming together: http://www.digitaljournal.com/pr/646802 http://www.digitaljournal.com/pr/646802
byrneseyeview 15y ago
Because the nature of the restatement is that they got more product returns than they expected, so they had to change some accounting policies to account for that. This doesn't affect cashflow, so it has minimal bearing on the odds that they're going under.

AznHisoka 15y ago

"Groupon has become a bellwether for a new generation of technology companies that, using technology, are able to build massive scale over short periods" If by technology, you mean lots of venture capital, and lots of money to throw at Facebook ads + Adwords...

anigbrowl 15y ago

Groupon's stumbles come as Congress advanced a bill, known as the Jobs Act, that would ease the regulatory burdens on fast-growing businesses. Under the act, Groupon, which has less than $1 billion revenue, would qualify as an emerging growth company, entitled to immunity from annual audits of internal accounting controls. The Jobs Act would loosen Groupon's duties "over exactly the type of controls that it was deficient in," said John Coffee, a law professor at Columbia University. Hm. I like the idea of easing the regulatory burden on emerging business, but anything with under $1 billion in revenue? That leaves room for a multitude of sins.

byrneseyeview 15y ago

Guys. This is bad news. But it's a tiny, transient issue, which they've already corrected. If you're serious about considering this evidence of fraud, it would be great to get an idea of how much you've shorted since the story came out (or plan on shorting Monday morning). Groupon's stock is down about 6% after this story, and I don't see any comments that indicate that this raises the odds that Groupon will collapse by a mere 6%. While there are lots of flaws with Groupon's current model, it's not very nice to jump on them for comparatively minor stuff like this.

prodigal_erik 15y ago
Apparently there were investors who wanted to after the IPO, but chose not to simply because there were too many others looking for shares to borrow. Has shorting GRPN become less expensive and risky between then and now? http://www.bloomberg.com/news/2011-11-10/groupon-stock-among-most-expensive-to-short-data-explorers-says.html http://www.bloomberg.com/news/2011-11-10/groupon-stock-among...

pbreit 15y ago

This will probably fall on deaf ears because HNers love to hate Groupon but does anyone here realize how difficult it is to account for financials that went from $14 million to $300 million to $1.6 billion over 2 years (with a great deal of it from very recent international acquisitions)?

maukdaddy 15y ago
Oh come on. There is absolutely no excuse for fucking up accounting and numbers like this. There are more than enough smart finance MBAs walking around Chicago that could handle the job. This is just further evidence of a company culture that is willing to play fast and loose, and do whatever it takes to make themselves look good despite terrible financials. Remember the rediculous metrics they created to hide their real numbers before the IPO?
sliverstorm 15y ago
If you've got $1.6B on the books, I would hope you could afford the talent to manage those books.

eli_gottlieb 15y ago

And the bubble pops!