Feeds

Groupon backs away from scheduled IPO

We sell other people's stuff discounted, not ours

Build a business case: developing custom apps

Groupon may be having second thoughts about when, and if, it should go public, joining the growing list of new web companies unsure of their steps in the market.

Groupon's roadshow, its bid to big up interest in its shares before the IPO, was due to start next week, but has now been called off, the Wall Street Journal reports.

Without a roadshow to convince folks to buy into the company, an IPO is unlikely to take place any time soon.

New web darlings have been attracted to the market by what has resembled the second coming of the dot-com boom. LinkedIn's IPO in May was showy to say the least, with shares more than doubling on the first day of trading to $94.25 from $45. Those dizzy heights were somewhat short-lived: the stock is today trading at around $79, still a respectable jump from its initial price.

However, there is a fair amount of concern that this dot-com boom could be as bust-prone as the last, with analysts and the market questioning the bottom line of some of these web firms.

After Groupon filed to go public in June, the US Securities and Exchange Commission (SEC) had to ask it to remove an unusual accounting metric, which it called Adjusted Consolidated Segment Operating Income (ACSOI), which was basically a fancy way to make it look more profitable, since it left out marketing and acquisition expenses. In the filing, Groupon said it thought this figure was "an important measure for management to evaluate the performance of our business".

"While we track this management metric internally to gauge our performance, we encourage you to base your investment decision on whatever metrics make you comfortable," it said in the filing.

The SEC has also had questions for social games company Zynga about how it measures its daily and monthly users. It also had questions about another unusual figures, what it calls "bookings", or revenue from the sale of virtual goods in its games. Zynga's filing said it used these figures internally and they weren't supposed to be a "substitute for revenue recognised in accordance with generally accepted accounting principles".

Zynga's IPO was due this month, but it might not happen now until as late as November, the New York Post reported last week.

Both Groupon and Zynga were reported by sources as having second thoughts about their IPOs because of the general turmoil on the markets. But particularly in the case of Groupon, pundits have been wondering if the firm's creative metrics are intended to mask a decline in its growth.

The company has been spending far more than it is making on its marketing, an expense that went from $4.5m in 2009 to a colossal $263.2m in 2010, its filing said. If you don't take the ACSOI figures, that means the firm made a loss last year of $456.3m, an incredible leap from the 2009 loss of $6.9m. And it was those numbers that started the unease among the analysts and observers, leading some to claim that the business model for daily deal sites is unsustainable.

In fact, the concern was so widespread it led to an email from Groupon CEO Andrew Mason to employees, subsequently leaked to AllThingsD, in which he slammed his critics for their "insane accusations" and went on to explain how the company was doing absolutely brilliantly.

Of course, this in itself wasn't a terribly good idea, as Groupon was in its IPO 'quiet period', the time the SEC requires a company to shut up about itself and not promote its stock. Despite the fact that the email was leaked, the postponement of the IPO may in fact be forced by the SEC, as it did with Salesforce.com's IPO in 2004 after the chief exec gave a lengthy interview to the New York Times in the quiet period.

At the time of publishing, Groupon had not responded to requests for comment from The Reg. ®

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.