Posted September 7, 2011 9:28 am by with 5 comments

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Question: What seemed to come up out of nowhere, generate too good to be true numbers, hype itself incessantly, act cute based on the supposed ‘irreverance’ of their young CEO, run up the hype on an IPO to unheard of levels, be found to be using creative accounting which caused IPO filing to go into a deeper review, have their CEO put together a memo to employees during their quiet period that just happened to be leaked and basically has told everyone to screw off because it’s their way or the highway?

Answer: Groupon

The long awaited IPO for the daily deal player has been put off indefinitely and the excuse is that the market isn’t right. In fine Groupon fashion they are using whatever is most convenient for them to not look as ridiculous as they are as a company. Bloomberg Businessweek reported

Groupon Inc., the biggest provider of online daily-deal coupons, is postponing its initial public offering and pushing back meetings with investors amid stock market swings, three people familiar with the matter said.

Groupon and its bankers were planning to pitch investors starting next week, said the people, who declined to be named because the company’s plans are private. Chicago-based Groupon may still be able to sell shares before year-end, two of the people said.

Stock market swings? How convenient. That makes some sense but there are three real reasons why this IPO is being delayed and the stock market isn’t one of them.

  1. The hype – Everyone is seeing that Groupon has done an almost fiendish job of hyping their model and their ‘success’. As people want this economy to turn around so desperately they bit on the hype. Groupon banked on that and won, to a degree. They turned down a $6 billion offer from Google and had the rumor mill getting their valuation up to the $25 billion range.
  2. The accounting – In order to look profitable Groupon had no problem inventing accounting methods. The SEC doesn’t take kindly to these kinds of activities and has been investigating these ‘methods’ based on the initial IPO filings from Groupon. As the delay has dragged on there are more and more questions as to whether Groupon was a Ponzi scheme or house of cards or (you put your own descriptor of a flimsy structure here). All of this talk tends to put a damper on high valuations since the real truth is that Groupon is simply not profitable.
  3. The CEO – In my opinion, Groupon’s CEO Andrew Mason is a huckster. He is young and acts as if the rules don’t apply to him or his company. There’s nothing wrong with confidence, in fact that’s a necessary quality of an effective leader. It’s when the confidence is a cover for arrogance and a seeming disdain for anything that gets in his way of getting to where he wants that is troubling. The final straw and real insight into Mason’s modus operandi was the recent internal memo that was “leaked” to Kara Swisher of All Things Digital. We may not want to admit but it looks like he played everyone so he could get his point of view out into the marketplace during the IPO quiet period. The ‘technique’ was sneaky at best and just plain slimy at worst and speaks volumes to the character of the head of Groupon.

As a result, is it time for Groupon to look for other leadership? When your lead dog is characterized as childish by folks in the industry that is not the kind of image a company needs to project when they are trying to get people to invest in them. Take a look at this video from a Washington Post post and see how Mason’s actions are explained. Also note another option provided by one of the interviewees.

The longer Andrew Mason is allowed to simply thumb his nose at the process and the rules of taking a company public the more damage he does to the brand. It quickly goes from “Oh, isn’t he cool because he is doing his own thing!” to “What the heck is this guy up to?” and that’s not good.

Many will argue that the processes for going public are onerous and over done. That’s probably true. Most things involving a federal agency get that way. While that may be disappointing to many it’s still the current reality. As a result, it’s best to do what you are supposed to do in order to get from point A to point B.

The trouble with Groupon is that they have not taken a straight line approach to navigate between the two points. Instead they have placed their trust in a CEO who is making as many huge mistakes as he has made successes. His mistakes seem to far outweigh what he has done right.

Is it time to consider what is happening at the top of Groupon? Is it time to see if there is a need to get a true business person with IPO experience in place to navigate these tricky waters? Something probably needs to happen because the way things have been handled to this point don’t bode well for the future of the company.

What’s your take?

  • Look at Lefkofsky

    Frank, look behind the curtain of Groupon. The real founder is a guy named Eric Lefkofsky, and he’s promoted flimsy companies like Groupon throughout the Chicago area. Starbelly, Ha-Lo, InnerWorkings — all of them with horrible financials, some with lawsuits. When the founders of Groupon took money away from their young company, Lefkofsky got the lion’s share. Andrew is Lefkofsky’s patsy.

  • Groupon should have taken the 6 billion…period. With its current model, the unique value proposition just isn’t there to sustain it financially. They have way too many employees for what they currently offer.

    I don’t know about a new CEO (I hear Carol Bartz is available), but maybe a strong board of directors that can get all of the cogs working together.

  • Noah Pology

    Groupon is self destructing from within. Andrew Mason is not running the company. It is being run (into the ground) by some German executives brought in to make it profitable. But everything they have done and are doing is destroying the company. People are quitting and being fired in droves. If you talk with Groupon’s salespeople, they all say they will be surprised if Groupon is in business in six months. If the IPO takes place, a lot of investors will be cheated out of their money. And is true that the books are being cooked (with German recipes).

  • Rob

    Hmm Groupon. My experience with them in Poland: called them 4 times, filled up 2 times contact form and never received the offer from them At 5th call I heard they are too busy… Definitely dislike!

  • Maybe Mason is working a deal for 50% off the valuation of Groupon. 🙂

    I started as a directory of daily deal sites. I have over 167 local deal sites and you can filter the list by city.