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Gini Dietrich

Groupon IPO In Jeopardy As They Violate SEC Rules

By: Gini Dietrich | August 31, 2011 | 
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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, a Chicago-based integrated marketing communications firm. She is the lead blogger here at Spin Sucks and is the founder of Spin Sucks Pro. She is the co-author of Marketing in the Round and co-host of Inside PR. Her second book, Spin Sucks, is available now.

114 comments
mindrise
mindrise

any news on this front? has groupon recovered?

jennwhinnem
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.

ginidietrich
ginidietrich moderator

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."

LoVilla
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.

hackmanj
hackmanj

Billion with a B, that is all.

Howie Goldfarb
Howie Goldfarb

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.

RogerFriedensen
RogerFriedensen

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.

Nick
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.

AllynHorne
AllynHorne

Amateur hour at Groupon - absolutely breathtaking

ElissaFreeman
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...

jeffespo
jeffespo

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

Jack Rayher
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
ginidietrich moderator

@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...

hackmanj
hackmanj

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

ginidietrich
ginidietrich moderator

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

ginidietrich
ginidietrich moderator

@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.

rustyspeidel
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.

kmskala
kmskala

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

ginidietrich
ginidietrich moderator

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

ginidietrich
ginidietrich moderator

@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.

Todd Lyden
Todd Lyden

@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
Nick

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

Howie Goldfarb
Howie Goldfarb

@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.

Nick
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

Trackbacks

  1. […] Don’t let success fool you. Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”  While success is exciting, and it’s okay to celebrate that, it’s important that you don’t let it get to your head. […]

  2. […] They have a huge corporate communication crisis on their hands, which started last August when they violated their IPO quiet period causing their vice president of global communications to get fed up and quit. […]