Gini Dietrich

Groupon IPO In Jeopardy As They Violate SEC Rules

By: Gini Dietrich | August 31, 2011 | 
135

On the radio yesterday, they did an interview with Daniel Kibblesmith, a 27-year-old comedy writer for Groupon.

Rumor has it he’s one of Chicago’s most eligible bachelors.

And, apparently last night, he was the guy date on The Millionaire Matchmaker. I’ve never seen the show, but I’ve heard the guys who are typically on there are douchebags.

But that’s neither here nor there.

Because, at the same time the RedEye was calling Kibblesmith most eligible bachelor (five days ago), Andrew Mason was firing off a memo to his staff saying everything the media is saying about their impending IPO is fine. He countered every point, including janky accounting practices and whether or not they’re running low on cash, which is all fine and dandy.

But the email made its way into the media stream.

During the period that they are required to be quiet as they approach their IPO.

The email likely has violated the SEC rules that a company must not release anything during the period leading up to the initial public offering. This is to prevent pump and dumb scams or insider trading on the stock market.

But the reason I’m writing about it today is because, right before that email was sent, Bradford Williams, the vice president of global communications at Groupon, quit. And the story in BusinessInsider makes it sound as though Mason wouldn’t listen to counsel from Williams and just did what he wanted anyway.

So let’s review:

  • Six days ago, the RedEye calls a Groupon executive a most eligible bachelor.
  • Six day ago, Andrew Mason fires off an email to his team that is leaked to the media.
  • Yesterday morning, Kibblesmith appears on Chicago radio, doing interviews about his show’s appearance and his role at Groupon.
  • Last night, Chicago’s most eligible bachelor appeared on The Millionaire Matchmaker.
  • Last night, BusinessInsider breaks the news that Williams quit…most likely a week ago, before all of this happened.

We talk a lot here about what we would have done if we were counseling News Corp. or Kenneth Cole or Tiger Woods. But, finally, a PR professional got it right.

Bravo, Williams, for standing up for what you believe in, knowing the SEC rules around the dark period, and telling your boss where to stick it when he doesn’t listen to your counsel…because you were right.

Oh, and P.S., the SEC has a history of pulling a company’s IPO for pulling stunts like this. Groupon, you’ve been warned. You were stupid to walk away from the Google $6B offering. Don’t be stupid again.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

  • Kudos for using douchebags in a blog post! 🙂

  • ginidietrich

    @jasonkonopinski I also used janky. I’m quite pleased with myself.

  • @ginidietrich Well, don’t get all hoity-toity, miss.

  • We talk a lot about how old-school businesses aren’t keeping up and learning from digital media. This is one way in which I think new media can learn from older, more established businesses. Sure, this kind of thing has happened for years, but it seems as if the younger entrepreneurs of the digital realm are a bit more cocky and immature, and yes, it is possibly a function of the fact that they are achieving success at a much younger age.

    A parallel would be the sports world, where teenagers and young 20somethings suddenly go from obscurity to multimillion dollar contracts overnight. And thus we see a lot of young professional (and college!) athletes making really bad choices that come back to haunt them.

  • RobertCollins

    @CorpWriter4Hire Silly Groupon – Though ones core culture will always rise to help or hinder when it matters most. cc: @ginidietrich

  • bikespoke

    When someone gives you 6 billion for a business model that has not shown any profit, especially in the economic conditions we are in globally, banks ans investors are forced to do their due diligence when investing. Should have asked for a cashiers check an walked out the door.

  • DebraCaplick

    I know this is a rarity, but this one leaves me speechless.

  • M_Koehler

    Yeah, walking away from $6 Billion was sooooo smart. Yes, the guys on Millionaire Matchmaker are typically douchbags. The women are not much better either. And bravo for using janky and in the correct context!!

  • G- you know it’s a genetic defect. Wondering if this is a bit of self-sabotage for some reason?

  • G- you know it’s a genetic defect. Wondering if this is a bit of self-sabotage for some reason?

  • rustyspeidel

    A. Men. $6B. Dumb. Asses.

  • rustyspeidel

    A. Men. $6B. Dumb. Asses.

  • rustyspeidel

    Hey G, relink to our blog post where we called this three months ago, so we can gloat. 🙂

  • MSchechter

    Oh man, you are going to make this easy for me… Millionaire Matchmaker?!? I bring solid gold to the table and you bring Bravo shows? GOING DOWN!

  • MSchechter

    P.S. as someone new to the world of PR is the strategy to try to distract the market from Mason’s blunder by trying to distract people with shiny bravo shows? Just dumb and not entirely following how the two threads weave 🙂

  • glenn_ferrell

    So Groupon, who refused to get out of the media water when the whistle blew, needs a new lifeguard. Gini ? (… insert Baywatch images here…)

  • ginidietrich

    @KenMueller The thing that gets me is they’re clearly getting the right advice, but choosing to ignore it. So it has to be arrogance. I don’t know what else it is.

  • ginidietrich

    @KenMueller The thing that gets me is they’re clearly getting the right advice, but choosing to ignore it. So it has to be arrogance. I don’t know what else it is.

  • ginidietrich

    @jasonkonopinski Yeah. I just broke my arm patting myself on the back.

  • ginidietrich

    @jasonkonopinski Yeah. I just broke my arm patting myself on the back.

  • ginidietrich

    @bikespoke A-freaking-men.

  • ginidietrich

    @bikespoke A-freaking-men.

  • @ginidietrich we were young and stupid once, right? ok, maybe not. I was never stupid. But I think I remember being young…

  • ginidietrich

    @DebraCaplick LOL! I let it stew all night before I wrote this. Arrogant.

  • Maybe its me, but I think as people get more money, they get dumber (or maybe just more arrogant) I can’t imagine what would make you want to go running off at the mouth at a time like that. Even I know what a dark period is.

    Anyone who goes on any of those shows is automatically less intelligent to me. Does he have a spray tan too?

  • ginidietrich

    @M_Koehler Yay! I used your word!

  • ginidietrich

    @faybiz I don’t know. Maybe. I think it’s more a function of arrogance and feeling like they’re above the law.

  • ginidietrich

    @faybiz I don’t know. Maybe. I think it’s more a function of arrogance and feeling like they’re above the law.

  • ginidietrich

    @rustyspeidel You don’t think our gloating in private is enough. Dumb, dumb, dumb. And we did call this.

  • ginidietrich

    @MSchechter Either way, they’re not allowed to have anything in the media. No leaked memos. No TV appearances. Nothing.

  • ginidietrich

    @glenn_ferrell Can you imagine? I’m gaining a pretty clear arrogance picture. No freaking way I’d go in the water for them.

  • ginidietrich

    @NancyD68 I don’t know about the spray tan. LOL! And it’s arrogance. Not stupidity.

  • FocusedWords

    @ginidietrich Or with them, right?

  • @ginidietrich Yes Gini. Arrogance and Ego ! The CEO’s with the Huge EGO’s, talkin about IPO’s. Whats next UFO’s ? Walkin away from $6 Billion ? Wow !

  • FocusedWords

    This on top of the Forbes article about Yelp and Facebook shutting down their daily deals doesn’t bode well for the price of the IPO IMHO. But then I haven’t figured out how to get investors to give me cash that I put in the pockets of earlier investors and still turn down $6B. Think Google is saying “Thank You, God” this morning?

  • M_Koehler

    @ginidietrich Tis a great word.

  • M_Koehler

    @ginidietrich @rustyspeidel There is absolutly nothing wrong with gloating about this one. Truly a stupid move on their part.

  • bikespoke

    To quote David Bowie song< " We could steal time, just for one day" running through their heads right now.

  • Talk about quiet periods to a lot of people and they don’t understand what you are referring to. As others here have mentioned I suspect that too much “success” has had a negative influence upon judgment.

  • MSchechter

    @ginidietrich Gotcha, like I said, I’m dumb. Didn’t realize you were saying that the TV appearance was as risky.

  • The only thing worse than being broke all the time is knowing that arrogant idiots have billions of dollars thrown at them for pure BS. Call it schadenfreude all you want, but there’s no shame in watching people like this fall hard, IMHO. The sooner, the better, too. Some of us could use that money to do useful things.

  • I think people tend to start seeing themselves as bullet proof when it comes to rules, guidelines and consequences. WOW Groupon, WOW!

  • EGarimbao

    How it is happened?

  • maniactive

    @mdyoder Wow. Is it possible that Groupon is too stupid to live?

  • glenn_ferrell

    @ginidietrich Yeah – if they don’t listen to the lifeguards, who knows what else they are doing in the water. Safer to swim with those sharks – even if they do have a bad rep.

  • glenn_ferrell

    @KenMueller Yeah – this was actually my first thought. The problem may be that too many “new school” businesses are spending so much time in the social media waters that they have come to think of themselves as fish — instead of businesses. There is this subtext to the social media layer of “you can never communicate too much”. Well, here’s a great (and likely financially-painful) example of communicating too much.

  • mdyoder

    @maniactive “You gotta know when hold ’em, know when to fold ’em…” 😉

  • mdyoder

    @maniactive Watch out, you’ll probably get Klout for groupon and roast. Or, maybe it will be toast!

  • maniactive

    @mdyoder Grosst.

  • Jack Rayher

    Too bad. I was hoping to short Groupon when they went public. All the retailers I talked to wouldn’t use them again.

  • ginidietrich

    @FocusedWords All I know is that if someone offered me $6B for anything, I’d grab it and run. I wouldn’t wait and see if I could do better in an IPO.

  • ginidietrich

    @bikespoke I don’t know that they’re even thinking they’re stealing time. Oy.

  • ginidietrich

    @TheJackB I just don’t know why you’d risk it. The IPO could be pulled and LOTS of companies could sue them. I don’t get it.

  • ginidietrich

    @Jack Rayher Same here. When clients ask us if they should try them, we recommend only if they have an inventory excess. Because it’s not going to bring them loyal customers.

  • ginidietrich

    @EGarimbao Do you mean have they pulled the IPO?

  • ginidietrich

    @janbeery I just don’t know why you’d mess with the SEC and your investors. I don’t get it at all.

  • ginidietrich

    @janbeery I just don’t know why you’d mess with the SEC and your investors. I don’t get it at all.

  • ginidietrich

    @wabbitoid I never wish anyone to fail, but I don’t understand why they would do this. If the IPO is pulled (it happened to Wired magazine in the late 90s), they’re going to miss a huge opportunity and be sued. It’s not worth the risk.

  • ginidietrich

    @wabbitoid I never wish anyone to fail, but I don’t understand why they would do this. If the IPO is pulled (it happened to Wired magazine in the late 90s), they’re going to miss a huge opportunity and be sued. It’s not worth the risk.

  • Why do cranky toddlers who need napping suddenly come to mind?

  • I like the convictions of the Flack but also know that it is another case of bad idea jeans from the startup

  • I like the convictions of the Flack but also know that it is another case of bad idea jeans from the startup

  • ginidietrich

    @SpaceyG on Twitter Ha! I’m stealing that analogy.

  • ginidietrich

    @jeffespo Sigh…

  • mozingojlpeo8
  • lesmckeown

    ‘Janky’?

  • FocusedWords

    @ginidietrich I would grab and run on $1B! The arrogance, the missteps, the stupidity totally amaze me. I thought the guys that were handing out the money would have been smarter than this.

  • FocusedWords

    @ginidietrich Oops, hit enter too soon. It does make you wonder if they have something up their sleeve that they are going to spring.

  • ElissaFreeman

    @ginidietrich @bikespoke Hmmm I was thinking more the Rolling Stones’ “you can’t always get what you wa-ant…”

  • Actually @ginidietrich I have to correct you a bit here. They’re allowed to have quite a bit in the media as long as it comes from the disclosures in their S-1 (Registration Statement) as file with the SEC. The TV appearance of an employee, even an officer, is not prohibited if it has nothing to with discussing the ‘business’ of the entity or otherwise promote the value. (You’re allowed to be personally stupid any time you want.)

    Too many companies use the IPO quiet period and even the quarterly ones as an excuse not to communicate which is just not what the regulations say. Yes, you have be more careful with your words and avoid hyping, but it is NOT a silent period.

    And yes, I watched this first hand as the senior PR person for the agency representing (and trust me fighting with) Wired Ventures. It is arrogance but it is also pressure, lack of experience and judgement that leads to trouble this deep.

    I haven’t looked at who the lead underwriter, accountant or attorney for Groupon but they’ve all let the client push the boundaries in ways that remind me of the late 90’s. In this day and age if you buy a stock that is sold based on anything other that GAAP accounting standards you’re gambling; not investing. (Of course you were then too and if you knew when to take it off the table you did very well.)

    Good for the PR guy for getting himself out of the middle of it.

  • @ginidietrich They purchased the stupidity bundle. It was a half price special.

  • ElissaFreeman

    And? Who is Groupon’s PR counsel? Any good crisis comms pro would have never let it get this far – unless Mason knew the advice and is riding shot-gun…

  • AllynHorne

    Amateur hour at Groupon – absolutely breathtaking

  • ginidietrich

    @RobertCollins You’re absolutely right about the culture rising

  • ginidietrich

    @bryanwillmert Arrogance, arrogance, arrogance

  • @ginidietrich Normally, I’d agree with you. But this isn’t pets.com all over again. These people have been consistently very arrogant and done an awful lot to mess up markets for small businesses that are struggling to make a go of it. I strongly believe that if they mess this up we need to make an example of their arrogance and laugh heartily at the demise. The more we can shame them and their followers the less likely we have to go through this BS ever again. Paint a scarlet A on them (for arrogance) and set them in the stocks, I say.

  • ginidietrich

    @GloriPerez Um, no. Not a good thing. You can get your IPO pulled AND sued by your investors.

  • ginidietrich

    @PASmithjr Morning crazy! Oh wait. It’s no longer morning. Never mind.

  • Well how many is that now for them @ginidietrich ?

  • bryanwillmert

    @ginidietrich groupon?

  • ginidietrich

    @kbkcomm Are you back?!? Or is this Jan?

  • ginidietrich

    @bryanwillmert Groupon

  • bryanwillmert

    @ginidietrich yeah they tend to carry a little (or a lot) of that subject.. it will be the demise

  • Nick

    Gini, why were they stupid to walk away from the 6B offering? Do you know the details of the offer Google was even giving? Do you think Google was just going to hand them a check for 6B without stipulations based upon future earnings etc? And for what percentage of the company and voting control? Until we see what type of capital they are able to raise via IPO or a private offering (more ways to raise money than an IPO), it is rather silly at this point to say Groupon was stupid to walk away from Google. I have no idea how you can draw this conclusion without A: knowing the exact details and B: knowing the finality of their public/private stock offering.

  • kmskala

    It’s easy to draw that conclusion…read the articles and stories coming out about them. ‘Nuff said.

  • kmskala

    It’s easy to draw that conclusion…read the articles and stories coming out about them. ‘Nuff said.

  • kmskala

    It’s easy to draw that conclusion…read the articles and stories coming out about them. ‘Nuff said.

  • kmskala

    The sad thing is the ego of Mason. He thinks Groupon is untouchable. IPO doesn’t go through? No biggie, he’ll go scam (I use that term loosely. I am not fan of Groupon) someone on the private market and raise a bunch of money. It’s like watch the Titanic.

  • Nick

    Yes, Groupon made a mistake because articles and stories came out about them. Great argument…… @kmskala

  • rustyspeidel

    @ginidietrich@M_Koehler Janktastic.

  • rustyspeidel

    @Nick I think it’s because they didn’t anticipate the reaction to their business model in the marketplace when they told Google to take a hike. Now they aren’t getting repeat business, their numbers are flattening, they’ve become arrogant, and they’ve jeopardized their IPO by violating SEC rules. Let’s just say this–if all those trends continue, $6B will seem pretty generous.

  • @rustyspeidel@Nick Plus Google was probably willing to let them run it nearly as is – it wasn’t like they were buying TECH- they need the sales people and email lists… now the competition is fierce, the market is TIRED, and he has made some BAD decisions on how to run his company

  • @rustyspeidel@Nick Plus Google was probably willing to let them run it nearly as is – it wasn’t like they were buying TECH- they need the sales people and email lists… now the competition is fierce, the market is TIRED, and he has made some BAD decisions on how to run his company

  • Nick

    You can’t say it is generous without knowing the actual facts. And it is arrogant and stupid to form a final judgment when the process is still ongoing. How on earth can you or anyone else in this comment stream tell me how much Groupon is worth? @rustyspeidel

  • Nick

    That’s right, you can’t. You can only speculate. Their traffic is up over 315% since last year. How is that flattening? Because of a month? Groupon could very well end faltering and at the end perhaps taking that offer could have been their best bet, but at this stage to use exact language is just, well, crazy. @faybiz @rustyspeidel

  • @Nick@rustyspeidel Nick, traffic does not = sales. This article gives you a decent idea why the model as is can’t be sustained: http://www.bnet.com/blog/advertising-business/ceos-naked-yoga-video-aside-is-groupon-approaching-its-endgame/9917

    as rusty suggests, this thing can’t last forever without some MAJOR overhaul

  • @Nick@rustyspeidel Nick, traffic does not = sales. This article gives you a decent idea why the model as is can’t be sustained: http://www.bnet.com/blog/advertising-business/ceos-naked-yoga-video-aside-is-groupon-approaching-its-endgame/9917

    as rusty suggests, this thing can’t last forever without some MAJOR overhaul

  • This reminds me a bit of the 20-something wunderkinds of the .com era who believed the laws of physics and business somehow didn’t apply to them. Were it not the hundreds of millions of dollars that were lost and the thousands of workers, consultants and investors who were left holding the bag, stories from those days appear almost quaint now. Oh those sock puppets were oh-so cute.

    Funny thing is, the SEC doesn’t much care about quaint. Or cute. Or arrogance. Like the IRS, CIA and FBI, the SEC tends to take its job pretty darned seriously. I’ll be surprised if this Groupon IPO doesn’t become a PileOnGroupon event.

    You can’t fix stupid. Or arrogant.

    Bravo to Bradford Williams for making the rest of us proud. He deserves not only to land on his feet but to land on ’em in a new pair of Berlukis. Or maybe just some flip-flops on a Mediterranean vacation.

  • HowieSPM

    Uhm…stupid once…stupid twice….you know it is gonna happen. There is arrogance in the air and I have been doing the math. I flat out are against the daily deal pricing/revenue structure for the businesses. Very very high cost of reaching people.

    Wait did you say Douchebag? I am telling @KenMueller on you.

  • HowieSPM

    @faybiz@Nick Facebook is a big pump and dump. You wait til their numbers that they keep secret come public with their IPO effort. I agree it is possible Groupon could of tried selling to Google, been exposed as a house of cards, and they have no plan B.

  • HowieSPM

    @ElissaFreeman Uhm I am their PR Counsel. I told them to get drunk and flip the bird at everyone. That was @ginidietrich ‘s advice to me when I called her in a panic.

  • ginidietrich

    @ElissaFreeman That’s exactly what they’re saying – he was getting the counsel (the right counsel) and completely ignoring it.

  • ginidietrich

    @lesmckeown It was a dare.

  • ginidietrich

    @jeffespo I’ve lost count.

  • ginidietrich

    @RickRice I stand corrected. I understood it to mean that if you were going to represent yourself as an officer of the company, and one that made you a millionaire, it was against the rules. And good point about gambling with anything other than GAAP accounting standards. They’re clearly breaking the rules there, too.

  • ginidietrich

    @glenn_ferrell@FocusedWords Give the sharks a break! They have bad PR!

  • ginidietrich

    @FocusedWords I thought that last year, too. I think they think they’re going to make more than $6B in the IPO. Maybe it’s the difference between men and women, but I wouldn’t be willing to take that risk. How many more billions do you really need, anyway?

  • ginidietrich

    @kmskala I’m not a fan, either, but I think it’d be really hard to recover from a failed IPO. I’d be mortified.

  • ginidietrich

    @wabbitoid But the problem is we WILL go through this again.

  • ginidietrich

    @AllynHorne Seriously.

  • ginidietrich

    @RogerFriedensen Apparently some big-time investor has already approached him, applauding him, and offering him a job.

  • ginidietrich

    @HowieSPM@KenMueller I totally said douchebag.

  • M_Koehler

    @ginidietrich@lesmckeown

    And it’s a great word

  • Billion with a B, that is all.

  • I had to hurry to be the 100th comment, do I get Gini Points for that?

  • I had to hurry to be the 100th comment, do I get Gini Points for that?

  • ginidietrich

    @hackmanj You win a prize!

  • @ginidietrich Ice Cream? How about a kitchen sink?

  • @ginidietrich Ice Cream? How about a kitchen sink?

  • ginidietrich

    @jonespt Which part? The PR pro who resigned or Groupon screwing up?

  • ginidietrich

    @hackmanj YES! But we’ll probably have to share it.

  • @ginidietrich haha, deal. For the innocent bystanders: http://www.sanfranciscocreameryco.com/kitchen_sink.html

  • ginidietrich

    @Nick You’re absolutely right that I’m not there and I don’t know the details. I talked about this, at length, last winter when the news came out that they turned the offer down. But I’ve been in the business world long enough to know that they won’t see that kind of money again. Even if their IPO isn’t pulled, the economy is worse now than it was in November. The stock market starts down nearly every day. They won’t do better in an IPO than they could have on the private market. Six. Billion. Dollars.

  • LoVilla

    I’ve heard nothing but negative comments and frustration regarding Groupon, from people who can’t redeem their offers to businesses who nearly went bankrupt over less-than-stellar “deals.” Considering the actions of its leaders, I now know why. Bravo to Williams.

  • ginidietrich

    Just read this in peHub: “In my story, I cited two analysts, one of whom — Scott Sweet, the principal researcher of Tampa-based IPO Boutique — told me that market rumors ascribing Groupon a valuation of $25 billion were “colossally absurd.” I also quoted Sam Hamadeh, founder of the private company research company PrivCo in New York, who said Groupon will be bouncing payroll checks in six months if it doesn’t go public or raise more money from investors.”

  • ginidietrich

    @LoVilla It definitely isn’t a “bring more loyal customers to me” business opportunity. I really don’t want them to fail – we need some success in this economy. But I just saw that they violated the rules again today. Sigh…

  • mercy
  • mercy
  • mercy
  • eric_andersen

    @SarahSteidinger thanks for the RT, Sarah – you a @Groupon fan? Also glad you got power back! In Natick we were out for ~2 days

  • SarahSteidinger

    @eric_andersen Thanks, Eric! We’re happy about power too! Used to be huge @Groupon fan, not so much anymore

  • jennwhinnem

    I saw that Millionaire Matchmaker – the next day I became aware of Groupon’s public issues. I thought “that’s some odd timing.”

    Apparently it’s worse than I thought. Thanks for outlining all of this.

  • any news on this front? has groupon recovered?

  • Pingback: Four Ways to Fail Your Way to Success by @kbkcomm | KBK Communications()

  • Pingback: The Communication Crisis Groupon Created for Itself | Spin Sucks()

67 Shares
Tweet
Buffer
Share36
Share24
+17
Pin
[postmatic_subscribe_widget]
[postmatic_subscribe_widget]