According to numerous sources close to the situation and after regulatory pressure, Groupon will amend its S-1 public-offering filing to remove references to an unusual accounting treatment that has attracted controversy.
Sources said the new filing by the social-buying company, which is helmed by CEO and co-founder Andrew Mason, will likely occur as early as Monday. It can't come a minute too soon regarding a metric called ACSOI, or adjusted consolidated segment operating income, which the Chicago-based Groupon used when it filed its S-1 documents in June.
Let's be clear, this is a number that does not include important costs, such as critical online marketing expenses to attract new customers to Groupon. Such accounting is called non-GAAP (generally accepted accounting principles). In 2010 and the first quarter of 2011, Groupon said its Adjusted CSOI was $60.6 million and $81.6 million, respectively.
On a GAAP basis, Groupon lost $413.4 million million for 2010 and $113.9 million in the first three months of 2011.
And, indeed, questions from the media, investors, and, most importantly, the Securities and Exchange Commission about how Groupon accounts for its revenue and profits using ASCOI were swift and decidedly negative.
Hence, a furious debate--along with much internal tension--within Groupon about what to do. At first, in another S-1 amendment, the company backed away from using ACSOI as a "valuation metric."
But that was apparently not enough for the SEC or anyone else, so Groupon's top managers finally thought it best to rid itself of the term entirely. That will happen next week, sources said.
And, in coming weeks, sources added, the company will be filing additional financial information about both its growth and costs, which will undoubtedly also be put under a microscope by the media, investors, and regulators.
A Groupon spokesman declined to comment when asked about the removal of ACSOI from its public-offering documents.