Groupon Inc (NASDAQ:GRPN) has been asked by the SEC to review its existing accounting practices and provide more financial information in future filings, reports Douglas MacMillan at Bloomberg. There have been no allegations of wrongdoing, but Groupon Inc (NASDAQ:GRPN) has come under scrutiny multiple times since it held its IPO two years ago.
The company should provide more information to investors: Jason Child
The Securities and Exchange Commission asked Groupon to give investors information about its policies, especially billing procedures and how the firm measures its take rate (the percentage of people who take an action that expresses interest in an item without actually buying it; the percentage of people who buy it is the conversion rate). Take rate is important in marketing as a sort of near miss, it shows that ad campaigns are targeting the right people and prompting action, and just need more work to increase conversions. A low take rate would mean that no one is even paying attention.
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There were also concerns about declining overseas sales that the SEC feels have not been adequately addressed.
Groupon Inc (NASDAQ:GRPN) had problems last year when it announced that there was a ‘material weakness’ in its accounting procedures and that it was working to strengthen its financial controls with the help of outside consultants, and this pressure from the SEC can be seen as the ongoing fallout from that admission. Today’s announcement was the disclosure of a letter dated June 26 in which Groupon Inc (NASDAQ:GRPN) CFO Jason Child said the company would provide more information to investors in the future.
Groupon’s stock fell sharply after its IPO
“The SEC’s Division of Corporation Finance is required to review all public companies periodically, and this was a routine examination of our recent 10-K filing,” said spokesman Bill Roberts. “We responded to their comments, and they’ve since let us know that their review is complete.”
Groupon’s stock fell sharply after its IPO, when many people thought it was a fad business that would soon be bankrupt, but it has rebounded sharply in the last few quarters and has gone well past its IPO market cap. Groupon Inc (NASDAQ:GRPN) is now worth more than the $7 billion, trumping the $6 billion offer that Google Inc (NASDAQ:GOOG) made in 2010 and that Groupon controversially rejected.