Groupon accounts for its revenue differently than say eBay, and in a way that some say is misleading to potential investors. The company defines revenue as "the purchase price paid by customers." Then there's the issue of "the cost of revenue," leaving the company with what it calls "gross profit," which is "the amount of revenue we retain after paying an agreed upon percentage of the purchase price to the featured merchant."
Here's the thing: Many companies like eBay , which also take a fee for transactions, would consider that "gross profit" number a "net revenue number." UCLA Anderson School's accounting lecturer Gordon Klein says the S-1 uses terms in a way he's never used them before, and this unusual accounting tells him that investors should "run from the stock." Others say this is a non-issue: Wedbush securities analyst Lou Kerner says that the company has done a totally adequate job outlining its accounting approach. Kerner says whether the company reports its revenue before or after direct costs should have zero impact on investors evaluation of the company.
Groupon's largest shareholder, Eric Lefkofsky was quoted in a Bloomberg story on June 3, within the company's "quiet period," saying the company " is going to be wildly profitable." He made the comments just one day after the company filed its IPO. And it just so happens that the prospectus indicates that the company is not, at least not at this point "wildly profitable." It appears that this comment is in response to questions about the company's profitability raised by the S-1.
Groupon will not comment on whether it has any plans to re-file with the SEC, citing the quiet period. The SEC declines comment as well. But sources familiar with the situation say it does look like this comment could be in violation of the quiet period. It's safe assumption that the SEC is looking into this issue. It's yet to be determined whether Lefkofsky's remarks are "materially different" from what has been said before, or whether the circumstances have changed so dramatically, it changes the nature of the comments.
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