The S.E.C. Pressed Groupon About Leaked Memo Last Month

Posted Dec 29, 2011

The U.S. Securities and Exchange Commission pressed Groupon CEO Andrew Mason last month amidst the company IPO about the Mason Memo that was leaked. The controversy around the memo is that there is supposed to be a “quiet period” in the press before a company has a public offering. In the memo, Mason laid out some of the financial metrics and trends to explain why Groupon is doing well despite all the bad press. In the memo, Mason said that he was “excited” about the company’s prospects and this could be considered as a way to pump the IPO.

Last month Groupon had their IPO and nothing bad happened as a result of the Mason Memo being leaked. However the company had to pay a decent amount in legal fees to make the issue go away. According to a company document, the SEC made at least a couple of phone calls to Groupon’s lawyers to provide a reason for why Mason’s e-mail did not violate IPO rules. The SEC also asked what measures Groupon took to make sure that the e-mail was not leaked out even though it did.

?Mr. Mason?s e-mail was not a publication or a publicity effort,? stated Groupon?s attorneys. ?It was a confidential communication not intended for public release, and it contained reminders to refrain from discussing any aspects of the Company?s business.? Mason had also sent out the e-mail to “improve employee morale.”

In the first letter that the SEC sent to Groupon, regulators asked the company to list specific risk factors for international operations, consumer attrition, repeat merchants, etc. Groupon also answered questions about the adjusted consolidated segment operating income (ASCOI), which is an uncommon financial metric used by companies. The metric included expenses related to marketing for existing subscribers.