Groupon will reap 'wild profits', says chairman

  • @MrNickClark

The chairman of Groupon has sought to play down fears around the value of the discounting site as it prepares to go public, predicting it would be "wildly profitable".

Yet the statements could land the company in hot water with the regulators as it is currently in a "quiet period" during which management is not supposed to talk about its financial prospects.

Groupon filed its formal initial public offering documents to the Securities and Exchange Commission (SEC) last Thursday, outlining its plans to raise $750m.

Yet, companies preparing to go public are limited in what they can say to potential investors, and the chief executive Andrew Mason moved to prevent a gaffe with a company-wide memo to staff last week.

Mr Mason said in the memo that the company would be in a quiet period for the following 90 days after filing "where we can't make any forward-looking statements about the company". He added that "anything we say now can be perceived as 'fluffing the stock' or something like that. So please don't say anything like 'Groupon is awesome' around anyone you don't fully trust."

Yet the chairman Eric Lefkofsky ignored his chief executive, after he was grilled on the track record of his companies, which included the response to Bloomberg that "Groupon is going to be wildly profitable". A spokesman for the SEC declined to comment on whether the regulator was to look at Mr Lefkofsky's statements.

Groupon released its financial performance in last week's prospectus. It showed the company has not made a net profit in its three years of operating and made a loss of $420m in 2010. It showed that at the end of March, the company had 83.1 million subscribers and 7,107 employees. Experts have placed question marks over when Groupon will become profitable, especially after the company said it expects "operating expenses will increase substantially in the foreseeable future". Some warned that it faced increasingly fierce competition.

This comes at a time when many fear that the excitement around online companies going public could usher in a second technology bubble. LinkedIn went public last month and its shares immediately doubled on the first day of trading.