Is the Groupon IPO Toast?

The IPO market is usually pretty exciting. Hey, it's a way for investors to
get a chance at finding the next Google (NASDAQ: GOOG ) or Starbucks (NASDAQ:
SBUX ). But the market also can be risky. Remember Pets.com? What about Webvan?
Unfortunately, there are hundreds of examples of implosions. And we might be
seeing another one that is, the Groupon IPO. Not long ago, it was considered a
New Age darling. But now, it seems the offering is falling into a black hole.
According to a report in The Wall Street Journal , it looks like Groupon has
cancelled its roadshow. Instead, the company plans to evaluate things on a
week-by-week basis. Of course, a key reason for the delay is the wrenching
volatility in the markets. Do investors really want to take a big bet on a
company like Groupon, which is losing hundreds of millions of dollars? After
all, the competition is extremely fierce, with players like LivingSocial and
even Google. Oh, and the Chinese market has more than 3,000 operators. In fact,
the growth rate of Groupon has been slowing down. It seems consumers are getting
daily-deal fatigue. Maybe this is why Facebook and Yelp have recently pulled
back their efforts in the market. Granted, such things should not kill a deal.
The fact is Groupon still is the dominant player in the space. As such, the
company should be able to use its scale and brand to bolster its advantages and
eventually get to profitability. Yet there remains a big problem: Groupon's
CEO, Andrew Mason. He recently sent an email to his employees regarding the
negative media attention, calling it insane and hilarious." As should be no
surprise, he said Groupon was in a great position to succeed. He also indicated
his support of a fancy accounting metric called "adjusted consolidated
segment operating income" which excludes marketing costs. Keep in mind that
the Securities and Exchange Commission has a different opinion on the matter and
required that its use be excluded in an amended prospectus. But there might be
even more trouble from the email. You see, Groupon is in the "quiet period,"
which means the CEO should not be sending out these types of emails. It actually
could delay the IPO even more. When prepping for an IPO, a CEO needs to keep his
cool. He must show he is in control, especially when the company is growing at a
rapid rate. This certainly has been the case with the CEOs of companies like
Pandora (NYSE: P ) and LinkedIn (NYSE: LNKD ). But as for Mason, his performance
has been perplexing and borderline unprofessional. And it's this kind of
behavior that investors definitely will consider when making a decision on the
IPO. Tom Taulli is the author of various books, including "All About
Commodities." He does not own a position in any of the stocks named here.