Groupon, Inc. (NASDAQ:GRPN) will have to face trial

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Dallas, Texas 09/30/2013 (Financialstrend) – On September 24, Groupon, Inc. (NASDAQ:GRPN) suffered a legal setback when U.S. District Judge Charles Norgle ruled that data presented by an individual investor Michael Carter Cohn merits a more in depth look and has given his go ahead for the trial.

November 2011 IPO

These legal troubles began for Groupon when Mr Cohn filed a lawsuit in 2012 accusing the  e commerce firm of intentionally misreporting its accounts and drawing up its balance sheets using illegal refund accounting policies in order to mislead and miss inform investors in the build up to its Initial public offering in November 2011. Post the IPO, Groupon reported huge loss from its 4Q11 operations thanks to weakness in its internal controls and oversight on part of management to set aside a corpus to facilitate customer refunds.

Stock melt down

The newly listed stock of GRPN saw a dramatic fall in its share value post this result announcement as investors reacted by dumping the shares. Huge loss suffered by Michael Cohn due to the market selloff induced him to take Groupon to court. Credit Suisse (CS), Goldman Sachs (GS) and Morgan Stanley (MS) are few of the big financial institutions who had facilitated the IPO and face potential negative exposure from this trail.

Operations

Groupon is an e-commerce portal which makes money by connects product producers and sellers to consumers. The USP for the customer is reduced prices on the products bought on this e portal. This is possible since the distribution and retailing costs generally associated in a sale of a product gets drastically reduced since the buyer and seller are trading directly through the good offices of Groupon. Company sends out daily e-mail blast to its registered users with specific information on discounts and special offers on goods and services. Groupon increases the effectiveness of these email campaigns by the use of business intelligence technology to determine personal preferences and buying pattern of customers.

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