An infographic (posted below) was recently published by BackgroundCheck.org that provides us with a great overview of why Groupon is being investigated by the SEC and how their accounting practices can be unreliable.
Highlights of the Groupon SEC Investigation Infographic:
Since 2007, Groupon has raised over $1.2 billion in venture capital.
In June of 2011 Groupon filed for their IPO.
In August of of 2011 the Groupon IPO was amended after information was released regarding their questionable accounting methods.
In September of 2011 Groupon recalculated their 2010 revenue to be nearly 50% of the original figure ($713 million down to $312 million).
Later in 2011 it is revealed that Groupon has not been setting enough money aside for refunds.
Groupon reported a net loss in the 4th quarter of 2011.
The Groupon share price continues to drop as there is increased scrutiny regarding their financial accounting practices.
Cause of the problem?
Groupon pays merchants before calculating refunds.
Merchants do not need to pay back money on refunds; Groupon eats all costs.
Revenue is accounted for and reported before all refunds have been made.
As there are so many companies attempting to make use of the online deal site business model. It will be interesting to see how the SEC’s investigation of Groupon pans out and what effect it will have on the industry as a whole.
Anson Alexander is a graduate from the University of Tampa with a degree in International Business and Information Systems.A previous IT Administrator for a medium size publication company, Anson has recently decided to work full time on his own business by publishing on AnsonAlex.com, publishing technology tutorials on YouTube and offering SEO, IT training and digital marketing services.His main interests include technology, social media, infographics, economics, marketing and web design.Connect with Anson on Google+.