Following the recent departure of Groupon’s CEO, Andrew Mason, Richard Lewis, Partner at Eversheds, commented that the move appeared to be motivated by a lack of confidence in the CEO, based on the company’s recent performance.
Groupon recently ousted its CEO, Andrew Mason, shortly after Groupon’s stock declined by more than 80% from its peak in November 2011. This follows the news in April last year that the US regulator, the Securities and Exchange Commission (SEC), was reportedly examining Groupon’s revision of its first set of financial results as a public company as previously reported by Eversheds.
As noted by Richard Lewis, due to the shareholding structure of Groupon the action to remove the company’s CEO “suggests that two of ... [Groupon’s shareholders] along with some other major shareholders may have come together to force out a CEO in whom confidence has been lost”.
When reporting on the alleged SEC review of Groupon’s revision of its first set of financial results Sam Jardine, Senior Associate at Eversheds, commented that:
“Accounting irregularities are not new to Groupon. [In 2011] it had to revise its financial reporting methodology before its IPO. ... Groupon must learn from [its] mistakes by becoming much more transparent in its accounting, or face an uncertain future. Its business model is largely dependent on its typically small to medium sized business partners fulfilling the Groupon deals, but the sheer volume of end customers means that these deals cannot always be fulfilled, leading in turn to customer disenfranchisement, customer complaints and customer refunds. And that needs to be factored transparently into accounting.”
The recent removal of its CEO suggests that Groupon has now taken note of the impact of its actions on recent performance and has taken decisive action. The question is whether the change in leadership is the change that the company needs to turn its fortunes around.