I must admit to being rather surprised how many people read my original post about Groupon and its aggressive accounting practices and, so, I would like to update you all on what is now happening at "the fastest growing company in the world".
Since my original blog, the company has been censured by the SEC for leaking emails during their "quiet period", they they discussed delaying the IPO due to "market uncertainties" and then they have pressed ahead with presentations to analysts. But as the latest Form S-1 attest, are the Emperors falling off to reveal that there was nothing there in the first place?
Last week the company was forced to do another about turn and once again re-file its Form S-1. This time they had used accounting practices to declare income of almost double what they previously declared.
Lets for a moment compare the original filing and the new one for the 2010 (Audited) figures):
It should be noted that whilst the Gross Billing figure remains in the Form S-1 as $745,348m it now takes the part of a note to the report and does not feature in the columnar headings!
So what did they do?
Previously the revenue figure included the total amount received on behalf of suppliers from customers. It does not impact on the overall loss of the business as it is a quick "in and out", but it does reflect on an underlying issue of trying to claim something is there when it is not. The method of accounting was used many times in the previous dotcom boom and since then businesses have moved away from it to be more transparent.
The business has still grown fantastically but, it does, once again, beg the question about the sustainability of the model and as any potential investor would want to know why do it. It must surely lead to questions surrounding the management team's (and advisers) judgements when presenting key financial data, which may be fine for a normal private company, but in the public arena or one where they have so much customers cash should be of concern...
Since my original blog, the company has been censured by the SEC for leaking emails during their "quiet period", they they discussed delaying the IPO due to "market uncertainties" and then they have pressed ahead with presentations to analysts. But as the latest Form S-1 attest, are the Emperors falling off to reveal that there was nothing there in the first place?
Last week the company was forced to do another about turn and once again re-file its Form S-1. This time they had used accounting practices to declare income of almost double what they previously declared.
Lets for a moment compare the original filing and the new one for the 2010 (Audited) figures):
| $ooo's | 23-Sept | 2-Jun | Delta | ||
Gross Billing | 713,365 | ||||
Revenue | 312,941 | 713,365 | -400,424 | ||
Cost of revenue | 32,494 | 433,411 | -400,917 | ||
0 | |||||
Gross profit | 280,447 | 279,954 | 493 | ||
Operating expenses: | |||||
Marketing | 284,348 | 263,202 | 21,146 | ||
Selling, general and administrative | 213,260 | 233,913 | -20,653 | ||
Acquisition-related | 203,183 | 203,183 | 0 | ||
Total operating expenses | 700,791 | 700,298 | 493 | ||
Loss from operations | -420,344 | -420,344 | 0 |
It should be noted that whilst the Gross Billing figure remains in the Form S-1 as $745,348m it now takes the part of a note to the report and does not feature in the columnar headings!
So what did they do?
Previously the revenue figure included the total amount received on behalf of suppliers from customers. It does not impact on the overall loss of the business as it is a quick "in and out", but it does reflect on an underlying issue of trying to claim something is there when it is not. The method of accounting was used many times in the previous dotcom boom and since then businesses have moved away from it to be more transparent.
The business has still grown fantastically but, it does, once again, beg the question about the sustainability of the model and as any potential investor would want to know why do it. It must surely lead to questions surrounding the management team's (and advisers) judgements when presenting key financial data, which may be fine for a normal private company, but in the public arena or one where they have so much customers cash should be of concern...
