Damage control:
Groupon stock rebounds on letter from CEO Mason
By Wailin Wong
Tribune reporter
11:00 AM CDT, May 7, 2012
Shares of Groupon were on the rise Monday, rebounding from weeks of declines as the company released an upbeat letter to stockholders from co-founder and Chief Executive Andrew Mason.
Shares were up 5 percent, or 50 cents, to $10.47. The letter, filed with the Securities and Exchange Commission as part of the company's annual report, acknowledged Groupon's troubles since going public in November and outlined its vision for becoming "the operating system for local commerce."
"Though the six months since our IPO have been rocky to say the least, the fundamentals of our business have continued to improve," Mason wrote.
In late March, Groupon disclosed a "material weakness" in its internal controls and restated fourth-quarter and full-year revenues, showing a decline in those figures. The company said it had underestimated the amount of money it needed to set aside for customer refunds. The disclosure sent Groupon's shares into a freefall. On Friday, the stock closed below $10 for the first time, marking a 45 percent drop since the revenue restatement.
Even with Monday's bounce, Groupon's shares have much ground to make up before returning to their $20 IPO price. Recent announcements, including the hiring of new senior executives and the replacement of two board members, had failed to stem the declines. The company's first-quarter earnings, scheduled to May 14, also pose an important confidence-testing event for investors.
Mason's letter provided broad strokes of how the company is seeking to transform itself into a technology-driven business whose products and services will "profoundly change the way we shop locally." Groupon critics have been dismissive of the company's technology pedigree from its inception, seeing it as a low-tech marketing play -- or, as Mason worded it in his letter, "a glorified mailing list."
"Today, Groupon is a marketing tool that connects consumers and merchants," Mason said. "Tomorrow, we aim to move upstream and serve as the entry point for local transactions."
Groupon's main engineering office is in Palo Alto, Calif., though it has tech staff in Chicago and Berlin. The company has made nearly a dozen acquisitions in the last year to absorb additional high-tech talent, and it's introduced products such as an online scheduling tool for merchants and a deal personalization algorithm. Groupon is also encouraging its members to purchase deals on their mobile devices. In April, nearly 30 percent of transactions in North America were done on mobile devices, compared with 25 percent at the beginning of the year.
wawong@tribune.com | Twitter @VelocityWong
Copyright © 2012, Chicago Tribune
chicagotribune.com |
