"This fact does not condone the horrendous financial reporting busts we have witnessed," Catanach said. "What is surprising, though, is the lack of 'good' counsel the company has received on these matters from both their own independent auditors as well as their investment bankers."
It's not a good pattern for a company whose IPO filing has delivered on acknowledgments from Mason that "we don't measure ourselves in conventional ways" and "our path will include some moments of brilliance and others of sheer stupidity."
Catanach puts the lie to the notion that this latest gaffe was unpredictable. The mistake sent Groupon shares sliding to near $14 heading into the Good Friday trading holiday, down from $26.19 two weeks after its November IPO launched at $20 per share.
Catanach and J. Edward Ketz, a professor at Penn State's Smeal College of Business, predicted it last summer in their Grumpy Old Accountants blog.
"It is absolutely ludicrous to think that Groupon is anywhere close to having an effective set of internal controls over financial reporting (given the company's rapid growth and expansion) ... and don't forget that Groupon admitted to having an inexperienced accounting and reporting staff," they wrote in a detailed post titled "Trust No One, Particularly Groupon's Accountants." "So we ask how have these weak or nonexistent controls affected the numbers Groupon reports? Can we trust these numbers?"
The tech sector will excuse, even embrace, eccentricities if coupled with proven profit. But Mason, who got defensive when the public interpreted Groupon's 2011 Super Bowl TV as socially insensitive rather than wry, is running a company that is not currently profitable.
After his company unsuccessfully floated the unconventional use of adjusted consolidated segment operating income as a metric in its initial IPO filing, Mason wrote to his employees (and indirectly the public) that everyone at Groupon should "feel a little bad about how downhearted the critics will be when we don't turn out to be a Ponzi scheme."
But even short of that, it's clear critics and criticism shouldn't have been shrugged off so dismissively.
"Once the (chief financial officer) and chief accounting officer got a sense that the Groupon reporting machine was spinning out of control, they should have brought in consultants to help them get on track," Catanach said. "They didn't do it voluntarily pre-IPO. Now they are being forced to do it after the fact, after another accounting disaster."
Among the many job openings advertised on Groupon's website is an opening for a CPA with five to seven years of accounting experience and two to three years management experience, and another for a financial analyst with more than two years in an accounting or finance department to serve as a liaison between the accounting, finance and SEC reporting departments. It's going to take more than that to ensure the books are straightened out.
And speaking of books, Groupon also is looking for a staff historian to tell its story as it negotiates what could prove a turning point. The question is whether the company will be historic or just history.
"I can only learn by doing something and failing," Lefkofsky told the business group in Northbrook. "You can't tell me to avoid a pothole; I have to drive it."
Still up for the ride?
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