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Shareholder sues Groupon after report reveals lower revenue

A shareholder in the Internet discount provider Groupon has filed a lawsuit against the company accusing executives of deliberately fudging its revenue numbers for the fourth quarter of 2011. The company's revised profit number, which is $14.3 million lower than its earlier claim, helped drive down the company's stock on April 2. It is possible that Groupon will argue that the error was due to the company's inexperience running a publicly traded company.

Internet users in Nevada have likely heard of Groupon and may have signed up for its service. For those who have not, Groupon is an email-based company that sends coupon offers to subscribers. Users have the option to purchase the coupons online until the offer expires, usually by the end of the day.

The revised earnings were revealed in Groupon's most recent 10-K filing, a type of annual report, with the Securities and Exchange Commission. Groupon said the lower revenues, which now stand at $492 million for the fourth quarter of 2011, were due to its failure to account for a higher rate of customer refunds. The larger number of refunds was partly due to the company beginning to offer discounts on higher-ticket services like eye surgery, Groupon said.

Groupon admitted in another SEC filing that its executives were fairly new to running a publicly traded corporation, but the shareholder lawsuit claims there is more to the error than that. The suit accuses the company of deliberately misleading the plaintiff and other shareholders about revenues, presumably to keep them from selling their shares.

Groupon made its initial public offering in November. Shares closed the day at $26.11, but were down to $15.28 by the close of trading on April 2.

Source: CFO.com, "Groupon Shareholder Cries Foul," Sarah Johnson, April 4, 2012

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