When a company goes through the IPO process, it needs to make various
amendments to its initial filing (which is known as the prospectus or S-1).
Often, the changes are fairly technical. For Groupon, these amendments often are
bombshells. For example, in late June, Groupon indicated that the Securities and
Exchange Commission required that the company change its accounting for its
revenue recognition . It could include only the commission on a groupon, not the
total value of the voucher. So for 2011, revenues were $688.1 million, not the
juicy figure of $1.52 billion. Such things can be a buzzkill for IPO investors
especially in today's jittery markets. In fact, it looks like the value of
Groupon might be as low as $3 billion now . Thats after it reached a whopping
$24 billion estimate earlier in the year. Will Groupon change its crazy ways?
Perhaps. In its most recent amendment, the company actually showed some realism.
Groupon said it will at some point "significantly" reduce its marketing
expenditures, without impacting its overall business. This definitely is
encouraging news. Consider that for the first six months of 2011, the marketing
expenditures came to a whopping $345.1 million, compared to $241.5 million for
all of 2010. So by bringing these down, Groupon hopefully should get much closer
to profitability, which is a reasonable goal. Hey, other top IPOs, such as
Google (NASDAQ: GOOG ) and Salesforce.com (NYSE: CRM ), were able to do this,
right? But the big question is: When will Groupon cut back on things? As of now,
were in the dark. Groupons merely stating a fuzzy goal. So ironically enough
Groupon just gave investors something else to worry about. Will Groupon ever be
a profitable company? And without an answer to that question, Groupons IPO will
be even more difficult to make a reality. Tom Taulli is the author of "All
About Short Selling" and "All About Commodities." You can also find him at
Twitter account @ttaulli. He does not own a position in any of the stocks named
here.
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