Problem For Groupon Arise

For many investors, Groupon, the pioneer of pay for coupons, seemed to be on the right track; a solid idea, good corporate structure, and best of all high profits. Now, however, as Groupon‘s initial public offering becomes tenuous, problems have arisen for the new company. Friday, the company told reporters it was cutting its reported revenue in half, and its number 2 executive left the company.

Regulators have been scrutinizing Groupon’s accounting since it filed for an initial public offering that could value the company at $20 billion.

Groupon said it would change what it books as revenue after discussions with the Securities and Exchange Commission. It will now only count as revenue its commission on sales, rather than the total value of an online coupon. Previously, when it sold a restaurant gift certificate for $10, for instance, it would book the full amount, even though a portion went to the business owner.

That change reduces Groupon‘s stated revenue for 2010 to $312.9 million, down from the $713.4 million previously reported.

The company argued in its amended filing document that it had always told investors to measure its value based on the cash it collected minus merchant payments.

For many investors, these issues signal trouble for the fledgling company, as many customers have already left Groupon for rivals, such Amazon. Moreover, if left unchecked, rumors of problems in the company’s leadership may lead some to abandon the idea of participating in the IPO.

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Park Sae-jin swatchsjp@ajunews.com