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Regulator probes Groupon as shares tumble

SEC looking into daily deal site's accounting snafu

Website security in corporate America

Daily deals site Groupon has seen its stocks tumble nearly 17 per cent, after mistakes in its fourth quarter results announcement forced the firm to issue a revision over the weekend.

Groupon shares finished US trading on Monday down 16.89 per cent to $15.27, meaning its stock has now fallen 41.5 per cent from its debut close at $26.11 just five months ago.

The coupon-pusher said that it had to restate its fourth quarter results, pushing up its loss in that quarter, because it hadn't accounted for the fact that higher-priced deals meant it had to put aside extra cash for possible refunds.

The company said it was taking measures to address the "material weakness" in its financial controls.

However, the Wall Street Journal reported that the Securities and Exchange Commission had launched an investigation into the snafu, according to a person familiar with the situation.

That person also whispered that the probe was in its preliminary stages and the SEC hadn't decided whether it would turn into a formal investigation or not.

Companies' financial reporting is usually closely monitored by the stock market regulator after they first go public, to make sure they're getting their sums right and playing it straight with investors.

The commission has already had to step in with Groupon before its stocks went live, when its initial public offering prospectus listed a controversial accounting metric that the SEC asked the firm to remove. The metric, ACSOI, listed income before marketing and acquisition costs, a figure that was far higher than its true income, since marketing is Groupon's largest outgoing.

Groupon's IPO ended up priced at $20 a share, valuing the company at almost $13bn, despite critics worrying that the firm's business model was untested and that it had yet to turn a profit.

The daily deals site is sticking with its forecast of a $15m to $35m operating profit for the first quarter of this year, a prediction that will be proved, or not, at the start of May. ®

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