Lawsuit Alleges Groupon 'Failed to Disclose Negative Trends' Relating to IPO Pricing
Updated:
Tuesday, 03 Apr 2012, 5:22 PM CDT
CHICAGO (Sun-Times Media Wire) -
Chicago - As Groupon stock fell to an all-time low Tuesday, the Chicago-based company was sued in federal court for allegedly releasing materially false and misleading statements regarding its financial results.
The lawsuit filed in U.S. District Court of Chicago on behalf of Fan Zhang claims the company failed to disclose negative trends that would have affected its IPO pricing of 35 million shares of common stock at $20 per share.
The shares plunged this week after the company on Friday revised its fourth-quarter results. That regulatory filing disclosed the company is having trouble with financial controls and also lowered its fourth-quarter earnings.
The filing, and reports that the SEC has begun an informal investigation, caused Groupons stock to fall Tuesday to an all-time low of $15.02.
Tuesdays suit criticizes Groupons ability to monitor its own financial results.
Groupons internal controls were so poor and inadequate that Groupons reported results were not reliable, the suit claims.
It claims Groupons revenue and growth were overstated, and the company was not nearly as resistant to competition as suggested by defendants.
The four-count lawsuit seeks class-action status, unspecified damages and interest, attorneys fees and other relief.
Groupon spokeswoman Julie Mossler declined to comment on the suit, citing the companys policy of not commenting on pending litigation.
Also named as defendants were Groupon founder and CEO Andrew Mason, chairman Eric Lefkofsky, chief financial officer Jason Child and chief accounting officer Joseph Del Preto.
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