initial public offerings (IPOs) trading on American exchanges

Sunday, September 25, 2011

Groupon tries to explain leaked memo in amended IPO document

Groupon Inc. is asking potential investors in its planned initial public offering that a leaked internal memo by Chief Executive Andrew Mason "not be considered in isolation," according to an amended prospectus filed Friday with the U.S. Securities and Exchange Commission.

The memo, which first appeared on the All Things D blog in late August, was a feisty rejoinder to much of the criticism that has swirled around Groupon's finances and business model since the company filed its IPO in June.

When the memo made the rounds in the media, Groupon came under suspicion that it had deliberately leaked the memo in an effort to defend the company without making a public statement, which is forbidden under SEC "quiet period" rules.

"The email was leaked to the media without our knowledge and has been reprinted by a number of news outlets," Groupon said in its Friday filing. "The email was intended for employees and not prospective investors and, therefore, did not contain the more complete information...described in this prospectus."

This is not the first time Groupon had to update its prospectus in response to remarks that became public. In July, the company amended its paperwork to discount a reported statement by co-founder Eric Lefkofsky that it would be "wildly profitable."

In other notable changes to the prospectus, Groupon introduced a financial metric called "gross billings," which is the gross amount collected from consumers for sold Groupons. Groupon used to call this figure "revenues," and reported $909.2 million in gross billings for the second quarter of 2011, up from $3.3 million in the year-earlier period.

Groupon is now defining "revenues" as the purchase price paid for a Groupon minus the commission that is paid to a merchant. In the amended prospectus, Groupon said it brought in $392.6 million in revenues in the second quarter of 2011, compared with $1.2 million in the same period of 2009. Previously, Groupon referred to this figure as "gross profit," but has now dropped the term "gross profit" from its filing.

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