Groupon stock down 17 per cent after reports of financial trouble
03 Apr 2012
The US Securities and Exchange Commission was looking into Groupon Inc's revision of its financial results, The Wall Street Journal reported yesterday.
According to the report, which cited an unidentified person familiar with the situation, the probe was in the preliminary stages and the financial regulator had not yet decided whether it would launch a formal investigation into the matter.
Yesterday, the company's shares were down 16.9 per cent following the online coupon provider's restatement, falling $3.11 to close at $15.28 a share.
On Friday, the Chicago-based company reported a "material weakness" in financial controls and added the fourth-quarter sales were lower than previously stated due to higher refunds to merchants, cutting revenue in the period, Groupon's first as a public company, by $14.3 million, to $492.2 million.
The announcement added to setbacks for Groupon, which had struggled to get its financial statements in order after filing for its initial public offering in June. The company abandoned an accounting method for operating income following a review by regulators and later restated 2010 results.
According to some analysts, the moves raise questions as to why Groupon's auditor, Ernst & Young LLP, failed to point out concerns earlier.
This should have been highlighted by the auditors, they said, adding, the business was growing so fast that it sounded like they did not have the proper financial controls to deal with the growth.
