Only a few weeks after being publicly embarrassed when it had to revise down its numbers for the fourth quarter of last year, Groupon is seeking to shore up its credibility and bring back investor confidence.
Groupon is in the process of hiring two new directors for its board, Bloomberg reported Tuesday, citing unnamed sources.
One of the new directors would eventually head the company’s audit committee but there currently are no plans to replace current chairman of the audit committee, Ted Leonsis.
Some of the candidates for the job include chief financial officers at other public companies.
At the beginning of this month, Groupon was forced to revise its fourth quarter revenue down 3%, or $14.3 million, to $492.2 million because of larger-than-expected returned deals over the holidays.
Originally Groupon reported a loss of $42.7 million, or 8 cents per share, saying at the time that its revenue for the quarter was $506.5 million.
On top of that, Groupon also had to revise its expenses for the quarter. Its operating income was cut down by $30 million and its net income by $22.6 million. Groupon’s earning per share went down by $.04.
The revisions caused investor Fan Zhang to file a class action lawsuit on behalf of anyone who owned Groupon stock, claiming that it had mislead investors about the health of the company. Zhang had owned 3,000 shares of Groupon before sellling them for a loss in March.
Groupon has a history of these types of errors, and they have proved to be extremely damaging to the company’s reputation.
After filing for a $750 million IPO in June 2011, it was forced to discard its “adjusted consolidated segment operating income” accounting method because it inflated the value of the company by not counting customer acquisition, online marketing, or stock-based compensation.
Then, in September, Groupon ran into trouble again, having to revise its 2010 results because it was counting fees paid to merchants as revenue. According to Groupon it had made $713.4 million in revenue for 2010. The SEC, on the other hand, found the number to be $312.9 million. Groupon eventually had to revise the number.
What Groupon needs now is to look like it is putting people in place who will stop these types of embarrassing errors from happening again.
“New blood would be good, particularly if they have strength in some of the areas they seem to be lacking right now,” Edward Woo, an analyst at Ascendiant Capital Markets LLC, told Bloomberg. “They need somebody with a skill set to help them stop doing these accounting irregularities.”
A Groupon spokesperson declined to comment on the story
(Image source: news.cnet.com)