Further to my column on the bad smell emanating from Groupon’s S-1 filing for an initial public offering, more details are emerging of how Groupon has been buying growth and the past business ventures of Eric Lefkofsky, its chairman.
Fortune has an article on how Mr Lefkofsky and Brad Keywell, his business partner, have launched other businesses that have grown rapidly and then run into trouble – and have taken out money through share offerings.
Meanwhile, Sarah Lacy at TechCrunch reports on the turmoil in Groupon’s international businesses, especially in China. As Sucharita Mulpuru of Forrester Research points out, much of Groupon’s growth comes from international acquisitions.
One thing this reminds me of, however, is the value of listings requirements and public market disclosure. In a world where late-stage technology investments are increasingly made through private markets such as SecondMarket and SharesPost, there is nothing like an IPO to bring awkward details into the open.
The fact that more than $900m from two earlier funding rounds totalling $1.1bn went to early investors including Mr Lefkofsky and Mr Keywell rather than to reinvesting in the business was not clear until it had to publish its S1 filing.
Indeed, Groupon gave the impression at the time than the main point of the fundraising was expansion rather than buying back the founders’ shares at high valuations, as this article from Internet Retailing records.
Of course, that is why the S-1 filing is there – to show potential investors the underlying dynamics of the business. The fact that it is overseen by the Securities and Exchange Commission ensures that companies cannot wiggle out of disclosure.
The value of stock market listings and the short-termism of public investors are often questioned. It is also worth remembering the safeguards that listings provide.
