The discussion about a tech bubble has been growing louder and louder as companies like Facebook and Twitter have received massive valuations. Groupon was set to try to capitalize on the frenzy but recent adjustments to their SEC paperwork may derail those efforts.
When the company first filed to go public in June it showed an operating income of $60.6 million for 2010 and $81.6 million for the first quarter of 2011. But upon reviews of Groupon’s accounting questions began to arise around its “adjusted consolidated segment operating income” (ACSOI), a metric that isn’t considered standard in IPO filings. ACSOI reports a company’s operating income excluding several major expenses, including marketing and acquisition-related costs.
“We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes,” Andrew Mason, Groupon’s CEO wrote in the report.
When Groupon revised the data and resubmitted, they showed a $420 million operating loss for 2010 and a $117.1 million loss in the first quarter.
That’s a pretty startlingly difference.
Since the report was revised and could now include data through the second quarter, it stated: “We had net income of $21,000 for the second quarter of 2009 as compared to a net loss of $102.7 million for the second quarter of 2011.” That’s two consecutive quarters of losses over $100 million.
Revenue figures for Groupon can also be murky because of the nature of its business model. When a customer pays, this is gross revenue, but an inherent cost is built into that revenue because Groupon must turn around and pay the merchant for their product.
