There’s an article in today’s Wall Street Journal about Groupon’s ability to create brand new ways of accounting. As someone involved in both technology and finance, I am horrified by the wool they’re trying to pull over our eyes.
Instead of using standard accounting practices, they’ve devised something called “adjusted consolidated segment operating income” that, get this, eliminates marketing expenses from their bottom line. Hey, what business wouldn’t look stellar financially if they didn’t deduct hundreds of millions of dollars in expenses from their bottom line? In the first quarter of 2011, they report that they had earnings of $81.6 million. Using standard accounting practices they actually lost $98 million. That a $150 million difference. What a load of crap.
It’s awfully fishy, especially because more and more companies are coming out and saying that Groupon increased their visibility but was economically a really bad deal for them. You can read all the stories by using this query on Bing.
So they’re about to file for an IPO using cooked books and a business model that is under attack. Forbes had an article recently about the increasing number of law suits the company is facing. The lawsuits deal with non-expiring coupons and coupons for alcoholic beverages that can apparently be purchased by minors.
This is a cautionary tale. When something is too good to be true, it is. Everyone is talking about Groupon’s fantastic new business model that turns retail on its head. They’re one of the fastest growing companies in the history of the US economy. Of course they are, they don’t account for their expenses.
Another thing that deeply disturbs me is that they are filing for an IPO. How many morons will throw money at them because they believe the lies? When companies raise money based on a pack of lies it hurts the entire market. When companies are deceitful with their accounting practices (Enron, cough, cough) it doesn’t just affect their management team and their investors. If Wall Street and the rest of America fall for this “adjusted consolidated segment operating income” then Groupon’s executives can laugh all the way to the bank – that is if they can cash out before their bubble of lies bursts.
Related posts:
Follow the dog on Twitter 
Loading ...
Kommentz