Groupon Major Global Technology Integration Initiative Has Started. Why Do They Need This Already? Silence on Costs! $GRPN
Groupon Inc. (Nasdaq:GRPN) announced some better results and encouraged the market to keep believing. Investor relations is subtly promoting the classic buy and hold lets us do the work approach to investing. OK so a new tech company out of the chute should be showing improvement that’s what investors have bought into, a rapidly improving story. Emphasis on “rapidly”.
In reading the conference call transcript I was struck by a comment made by Andrew Mason CEO on the second page. He announced Groupon had kicked off their first major global technology integration initiative. According the Andrew Mason there will be some foundational rebuilding in the short-term, but he believes that over the long-term, this project will allow Groupon to move much faster and more easily apply technology.
Err excuse me. What does this all mean? Just what is a global technology integration initiative. You are a brand new tech company with a lot of answers supposedly. Everyone anticipated a global approach. Given that you are so brand new what has happened that you need a global integration initiative. What did or did not happen to your platforms. Class action lawyers need to review the underwriting documents. Was this requirement identified.
At this point no mention of costs but Groupon does have the ability to say “As previously disclosed”. This gives them some wiggle room in the Reg FD challenged space. Not one analyst picked up on the point in the conference call. So we have no explanation as to the true scope and nature. Groupon can rightfully say we mentioned it in the conference call but no one wanted to talk about it.
Well Groupon in the interest of clarity and visibility why don’t you add more colour on that point. if it is important enough to mention from the CEO’s lips than it must have big costs and big impact. How can investors feel well-informed without understanding the scope, scale and costs.
George Gutowski writes from a caveat emptor perspective.
- Groupon Slithers Away Friday Night $GRPN $FB $GOOG (financialskeptic.wordpress.com)
- Groupon’s Q1 shines: Chest thumping in order? (news.cnet.com)
Groupon Inc (NASDAQ: GRPN) announced a material weakness in its accounting policies. It tried to assuage investors that the real numbers like cash flow and real profits are still the same. Also the critical guidance was going to stay the same so hang on investors stay with the cause. Personally I have to disclose to you that I originally signed up for Groupon deals identifying myself as a solvent white educated male in my very late 50′s interested in fine dining, wines, scotch, cigars and very cool stuff for my grand-daughter. I received a slew of offers for nail extensions and nothing for my grand-daughter. Nothing I tell you. So I have been dubious about the underlying business case as it did not work for me.
So when I learn that this high flier has a serious problem with its accounting controls somehow I’m not surprised. What is surprising is managements expectations that this can be shrugged off. They claim to be working with another global accountancy to establish the correct policies. The claim says they have been working on the issue for several months. Ahem investors look at this point. If the new boy accountancy has been hired several months ago it means Reg FD has been violated. Groupon management knew about the problem but did not want to disclose or failed to disclose. Governance Governance Governance.
The smoking gun will be the terms and reference of the engagement agreement between Groupon and the third-party accountancy. They must have been hired to fix the problem because that’s what the updated guidance said they were hired to do. Do you think Groupon’s legal department see’s it that way? Why did they sign off on the press release and let them walk into the REG FD buzz saw? Do they understand Reg FD and securities litigation? Many class action lawsuits have been announced so maybe not. At this point there are seventeen announced actions so maybe the legal side is catching on.
I just find it very odd that they chose not to name the third-party accountancy firm that is investigating the material weakness. What could the damage be? Ernst and Young will do the audit. But given the responsibility that auditors now have what are the odds that Ernst and Young are reaching for their pen to sign off on the numbers.
We may have an interesting discussion about materiality. It’s only some $35 million that’s nothing for a fast growing company with rapacious shareholders. But to someone like a Google (Nasdaq:GOOG) or a Facebook (FB) who have an end game mentality a $35 million anomaly which depresses the price just might be the best piece of news their boards have heard in a long time.
George Gutowski writes from a caveat emptor perspective.
- UH-OH: The SEC Is Looking Closely At Groupon, Says Report (GRPN) (businessinsider.com)
- SEC Hit Groupon (247wallst.com)
- Groupon Is Having Trouble With the New Math (dailyfinance.com)
- Groupon’s Accounting Issues Are Worse Than You Think (fool.com)
- Groupon Is Having Trouble With the New Math (fool.com)
- Time to Fire Groupon’s CFO (247wallst.com)
- Groupon’s Stock Tanking and Lawyers Circling After Issuing Correction (allthingsd.com)
Google (GOOG) just offered a ridiculous amount of money for Groupon. Google which pioneered targeted search driven advertising had originally promised advertisers that they can find the interested consumer who will buy. Groupon is locally based but still old school mass marketing. For a while I subscribed to Groupon in my own major metropolitan area. I despaired when I received several ads for spa treatments and acrylic nails. I don’t care what the discount was. I am not in that market.
Google just spent billions of dollars to annoy me and other potential consumers with desperate ads for products that are not on my radar.
Disclosure: George Gutowski writes from a caveat emptor perspective. I do not hold positions in stocks mentioned in this post.
- Analysts: $6B for Groupon a Bad Deal for Google (pcworld.com)
- Creative Joke: Groupon for Groupon (mymodernmet.com)
- Groupon Grows More Valuable: After Google Offer, Expansion Plan Launched (dailyfinance.com)
- No Groupon Discount for Google (online.wsj.com)
- Groupon’s Board Is Meeting Wednesday To Decide Whether To Take Google’s $6 Billion Offer (businessinsider.com)
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