Groupon shareholder sues over alleged misinformation

John Moe Apr 4, 2012

Jeremy Hobson: The daily deals website Groupon is being sued by a shareholder who says the company misled investors about its finances. Last week Groupon revised its fourth quarter earnings saying it failed to set aside enough money for customer refunds. The Securities and Exchange Commission is reportedly now investigating that change.

Marketplace Tech Report Host John Moe is with us live for more on this. Hi John.

John Moe: Good morning.

Hobson: So what’s going on here with Groupon?

Moe: Well, the plaintiff charges that Groupon’s growth and revenue were overstated; that it’s not as resistant to competition as it made itself out to be; that it issued false and misleading results. And the internal controls were so lousy that it made reporting its own results pretty unreliable. Essentially, he’s saying that Groupon is a lemon of a car with a new paint job slapped on it.

Hobson: And Groupon has been a real success story in the world of tech — does something like this matter to Groupon? Is the company as concerned with its shareholders as it is with, say, its customers?

Moe: Whether it’s shareholders or customers, Groupon really relies on trust. And it’s obviously a different business model. So to get people to come on board for something like that, those customers or those investors need to know that the transaction is secure; the deals are honest; that everything is on the up-and-up. And if that’s not the case, and if Groupon loses that confidence, bigger companies are perfectly willing to come in and take over in that coupon space that Groupon has been establishing for so long. Google wants to get in there, and Facebook, and a bunch of other companies would love to be in that space.

Hobson: And many already are. John Moe of Marketplace Tech Report, thanks a lot.

Moe: Thanks.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.