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January 30, 2023

Maybe Groupon’s Dodgy Financial Reporting Is the Result of Management Still Warming Up to Each Other

On Tuesday, we jumped on the bandwagon with a few others that have suggested Groupon CFO Jason Child find something else to do with his time. You see, things haven't panned out so well for the company as far as financial reporting goes. Their original S-1 filing got a hearty laugh from everyone and then, after we had forgotten just how hilarious inconspicuous accounting metrics can be, the company announced last Friday that some numbers weren't, in the traditional sense (i.e. GAAP), correct. 

For an ordinary company, transgressions such as these would be met with swift and unmerciless justice. But Jonathan Weil pointed out something in his column yesterday that made us pause, if just for a second:

Groupon’s IPO prospectus cautioned that future disclosures about control weaknesses were possible. It also said the company had only “recently filled a number of positions in our senior management and finance and accounting staff.” However, the prospectus made no representation about whether Groupon’s controls were effective at the time. None was required.

In other words, Groupon kinda sorta knew that this could be a problem. And because management still hasn't gotten too chummy, this should be expected. You know how it is. People probably still aren't doing much more greeting each other in the hallways with awkward glances. Here's the full paragraph from Groupon's prospectus:

Our management team has worked together for only a limited period of time and has a limited track record of executing our business plan as a team. We have recently filled a number of positions in our senior management and finance and accounting staff. Accordingly, certain key personnel have only recently assumed the duties and responsibilities they are now performing. In addition, certain of our executives have limited experience managing a large global business operation. Accordingly, it is difficult to predict whether our management team, individually and collectively, will be effective in operating our business.

Think about it this way – co-founders Eric Lefkofsky and Andrew Mason probably josh each other with dick punches around the office all day long. Jason Child, on the other hand, has only been crunching the numbers at Groupon since December 2010. Chief Accounting Officer Joe Del Petro has only been with the company since January 2011. So conceivably, these guys aren't still adjusting to each other's quirks – Joe formatting his cells for "currency" rather than "accounting" just being one example of something that still could throw Jason off. Similarly, Lefkofsky and Mason probably don't even know these guys' names. Give them a little more time to gel, okay?

Groupon IPO Scandal Is the Sleaze That’s Legal [Bloomberg] 

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