Posts Tagged ‘accounting’

Uh oh: Groupon forced to revise its financial results again.

April 2, 2012

To refresh you memory …

Prepping for its IPO, Groupon had to cut its reported revenue in half to satisfy questions from the Securities and Exchange Commission.

Then, the company  IPO’d in November for $20 per share.   Last Friday the shares closed at $17.20.

What happened ?

Well first, according to the WSJ:

Groupon reported an unexpected loss of $37 million on revenue $506.5 million for its fourth quarter —  its first period as a public company.

The news triggered a selloff in the stock as investors had expected the company to post a profit.

To make matters worse, the loss was understated by $22.6 million … because auditors discovered that the company “ failed to set aside enough money for customer refunds.”

Oops.

Here’s the story:

Groupon offers discounted deals to its subscriber base, and then splits the value of the deal with the merchant that offered it.

For a $10 purchase at a sandwich shop, for example, Groupon might take $5 and give the rest to the merchant.

The company makes a point of telling users that refunds won’t be a hassle.

Groupon emphasizes something it calls “the Groupon Promise,” which means “if the experience using your Groupon ever lets you down, we’ll make it right or return your purchase.”

Groupon had more customers seeking refunds than it expected.

The company also said the higher rate of refunds has persisted in the first quarter ending March 31.

Also according to the WSJ: “The surprise announcement raised questions about the reliability of Groupon’s numbers.”

You think ?

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