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Groupon Will Have to Face Lawsuit Related to its 2011 IPO

Sep 20, 2013 5:40 am

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Groupon’s incredibly hyped success coupled with difficult-to-understand revenues made it a poster child for the excesses of recent fast-growing startups. In related news, Uber is doing quite well.

— Jason Clampet

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Groupon Inc., the deal-of-the-day coupon company, lost a bid for dismissal of a lawsuit complaining the company misled investors about its financial performance before its initial public offering in November 2011.

U.S. District Judge Charles Norgle in Chicago ordered Groupon to face the class-action lawsuit first filed in April 2012.

Investors accused the Chicago-based company of securities fraud and claimed it used impermissible refund accounting to boost revenues in a prospectus in connection with its IPO and in later U.S. Securities and Exchange Commission filings, according to a revised complaint filed last year.

“The court finds that these allegations present plausible violations,” of federal securities law, Norgle said in yesterday’s ruling.

Groupon opened at $28 in Nasdaq stock exchange trading on Nov. 4, 2011.

The company reported a “material weakness” in its financial controls on March 30, 2012, and said its first reported quarterly sales as a publicly traded company were lower than previously stated because of higher refunds to merchants, reducing revenue in the quarter ended Dec. 31, 2011, by $14.3 million to $492.2 million.

By Nov. 13, 2012, the company’s shares were trading at $2.63. Today, Groupon rose 9 percent to $12.59.

Groupon doesn’t comment on pending litigation, Nicholas Halliwell, a spokesman for the company, said in an e-mail.

The case is In re Groupon Inc. Securities Litigation, 12- cv-2450, U.S. District Court, Northern District of Illinois (Chicago).

Editors: Michael Hytha, Joe Schneider. To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net. 

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