Groupon, until recently, was the daily-deals darling.
But according to The Wall Street Journal, the Chicago-based company is slashing its reported revenues by half--from $713.4 million in 2010 down to $312.9 million--in accordance with accounting revisions prompted by the SEC. What's more, after only five months on the job, Groupon's second COO of the year has quit.
Groupon was recently compelled to change its accounting practices after discussions with the Securities and Exchange Commission (SEC). Valued at $20 billion, Groupon was on track to move forward with a $750 million IPO, but in June it was revealed in S-1 filings that it had nearly $400 million in net losses, which triggered an intense backlash, widespread doubts about its business model, and SEC scrutiny.
Apparently, Groupon had characterized "revenue" as the full price of a sold daily deal. But the company failed to disclose the 50-50 revenue-share, or portion of sales, that was paid to local merchants for offering the daily deal.
This accounting error compelled Groupon to restate its previously issued Consolidated Statements of Operations for 2008 through 2010. "Historically, the Company has reported the gross amounts billed to its subscribers as revenue. All prior periods have been restated to show the net amount the Company retains after paying the merchant fees."
Margo Georgiadis, Groupon's second COO to leave this year, is returning to Google, her previous employer. Rob Solomon bowed out as Groupon's COO after two months in the position. These high-level executive departures prior to a company IPO certainly raise concerns among investors.
Earlier this week, reports surfaced that LivingSocial, Groupon's closest competitor, is reconsidering its $100 million IPO. Bloomberg has reported that LivingSocial is in talks to raise $200 million for a valuation of $6 billion. An IPO, postfunding, is reportedly still an option.