Daily deals site Groupon is cancelling its investor roadshow, scheduled for next week, according to Bloomberg reporter Emily Chang, in a clear sign that the company’s IPO prospects have dimmed.
Bloomberg is now reporting that Groupon has delayed its IPO, which some expected to happen as soon as the middle of September.
From the WSJ:
Groupon Inc. is reevaluating its plans to go public in the face of stock market volatility, said a person familiar with the matter.
The Chicago-based daily deals site isn’t cancelling its initial public offering, said this person, but is reassessing the timing for an IPO on a week by week basis. Groupon had originally been aiming to go public after Labor Day and to price its shares in mid-September, this person said, adding that the company had set up a roadshow next week to attract potential investors to the stock.
Given the recent stock market gyrations, Groupon executives had started taking a wait-and-see approach, paying close attention to market volatility in Europe, added this person. With international markets continuing to tumble overnight, executives decided to put the IPO on hold, the person said. The roadshow has been canceled, this person said.
The person also said that the U.S. Securities and Exchange Commission contacted a Groupon attorney last week, asking them to answer a series of questions related to a recently leaked memo in which Groupon Chief Executive Andrew Mason touted the company to employees. Making public statements about the financial status of a company during an IPO process is prohibited by SEC rules.
Groupon initially filed its S1 to go public in June, with a valuation of $20 billion.
Groupon is the world’s largest daily deals site, and has become synonymous with the daily deals industry. However, there has been a flood of bad news about the company in recent months, with a 50 percent decline in website traffic in July alone.
In December Groupon turned down a $6 billion acquisition offer from Google, which many thought would be followed by the announcement that the company wished to be a publicly traded concern.
As recently as two weeks ago, Groupon founder Andrew Mason was on the offensive about the IPO, and the company’s future, sending out a memo to employees, challenging, among other things, the accusation that the accounting practice of measuring company performance in ACSOI, instead of revenue was voodoo economics.
As VentureBeat reported:
ACSOI, or adjusted consolidated segment operating income, is a metric Groupon used to show income while excluding certain expenses such as marketing. The unusual measurement raised eyebrows, since it is not a standard measurement utilized by most public companies’ accountants. The practice was a faint echo of novel metrics used during the height of the dot-com craze, such as “eyeballs” instead of revenue.
Mason also deflected criticism that the company was also rapidly running out of money, which was sure to spook investors.
“While we’ve bitten our tongues and allowed insane accusations (like in the article above) to go unchallenged publicly, it’s important to me that you have the context necessary to brush this stuff off.”
There is speculation that the leaked memo, which is at the center of an SEC investigation, is part of the reason why the investor roadshow is being cancelled, as Business Insider is reporting. The leaked memo is in violation of SEC rules which require that companies observe a “quiet period” after filing to go public.
Groupon has 3,100 employees, and has so far been the recipient of more than $1.4 billion in private investment, from leading names such as Accel Partners, Digital Sky Technologies, Morgan Stanley Venture, Greylock Partners, and prominent individuals like Ted Leonsis, one of the founders of Aol according to CrunchBase.
However, Groupon’s success spawned hundreds or even thousands of daily deals clone sites, and it is facing steep competition from sites such as LivingSocial, which received a $150 million investment from Amazon.com.
This is a developing story. Please refresh for updates.