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Newly Disclosed SEC Documents Reveal Groupon's IPO Raised More Questions Than Answers

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Groupon's IPO Raised More Questions Than Answers

REUTERS

The Groupon smartphone app is displayed on a Motorola Droid Bionic cell phone in Denver November 4, 2011. REUTERS/Rick Wilking

We all know that Groupon has fancied itself as a funny company, but some newly disclosed documents of correspondences between the SEC and Groupon suggest it's also been conducting some funny business.

It goes both ways,  though, and sort of paints the SEC as more of a hall monitor than a regulatory body. For instance, as Crain's points out: "The SEC questioned why a money-losing startup used $940 million of $1.1 billion in venture capital to partially cash out early investors rather than invest in growth. Many analysts and some potential investors raised similar questions."

Groupon explained that the decision “was made by management and the board of directors based on an assessment that the company's projected cash flow from future operations would be sufficient to support the company's growth strategy.”

On the other hand, why this was even allowed to fly seems even more ridiculous as the SEC couldn't figure out how Groupon's business model actually worked.

One could draw the conclusion that the IPO was largely a means for its earliest supporters to cash out instead of furthering the company. After all, have you seen how the stock has been doing? Today it's down 1.12 points to $21.54, which is barely above where it started.

Make of that what you will. 

David Wolinsky is a freelance writer and a lifelong Chicagoan. In addition to currently serving as an interviewer-writer for Adult Swim, he's also a columnist for EGM. He was the Chicago city editor for The Onion A.V. Club where he provided in-depth daily coverage of this city's bustling arts/entertainment scene for half a decade. When not playing video games for work he's thinking of dashing out to Chicago Diner, Pizano's, or Yummy Yummy. His first career aspirations were to be a game-show host.

Related Topics Groupon, SEC, Connect The Dots
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