As Groupon echoes its own daily-deal business model by trading more than 60 percent below its all-time high, one analyst dissected the company’s recent board shake-up and said it probably went public too early and got too big, too fast.
On Monday, the company announced that Starbucks CEO Howard Schultz and venture capitalist Kevin Efrusy were leaving the board. American Express’Chief Financial Officer Daniel Henry and a Deloitte Vice Chairman Robert Bass will take their places and also serve on company’s audit committee.
“Board members change sometimes, but very rarely do they change so soon after a company goes public,” said Jordan Rohan, an analyst with Stifel Nicolaus. “The accounting issues that have surfaced at Groupon at some level are quite serious because they undermine the confidence in investors.”
Rohan told CNBC’s “Squawk on the Street” that the new board members, who have accounting and finance backgrounds, will likely enact some big changes affecting how Groupon operates and communicates with its partners and Wall Street.
“I think this is a good move for Groupon — a necessary one — but probably only move one out of several moves to restore confidence,” he said.
In March, the company came under fire after revising its fourth-quarter financial results and admitting that there was a “material weakness” in its financial statements, just months after its initial public offering.
Rohan mentioned the need for additional transparency at Groupon. Some investors’ confidence has been undermined since the company stopped disclosing as many figures to investors, he added.
“What we have here is a company that probably came public a bit too early — before the business model was tight,” he said. “Given the high valuation that it was able to enjoy for a very brief period of time, it gave them no room for error. That would normally be fine with private companies that are learning how to get their legs. At some level, Groupon is a victim of its own early success, because it got too big and too fast.”
Rohan does not see any reason that the stock would rise ahead of its June 2 lock-up expiration for insider selling. He called Groupon “a defenseless stock, which can only really go down.”
“The journey from hype to disillusionment is a really painful one,” he said. “That’s what investors are seeing.”
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Jordan Rohan does not own shares of Groupon. His firm does have an investment banking conflict with Groupon.
Follow Katie Little on Twitter @katie_little.