Chatting with a prominent securities lawyer yesterday, VentureBeat was told to expect a wave of lawsuits against Groupon from investors who felt the company misled them about financials. The first one has now hit the docket, filed by investor Fan Zhang in a class action lawsuit in federal court in Chicago, Groupon’s hometown.
Zhang hopes that investors will join him as he seeks class action status — anyone who bought stock between Nov. 4 and March 30, when Groupon announced revisions to its first quarter earnings and admitted it had problems with its internal financial controls. According to Bloomberg, Zhang owned as many as 3,000 shares from Feb. 9 to March 6, bought for as much as $21.75. The stock has fallen more than 16 percent in the last two days to $15.02 a share.
Groupon and its executive team, including chairman Eric Leftkovsky and CEO Andrew Mason, are not the only targets of this lawsuit. Underwriters Goldman Sachs and Morgan Stanley are also named in the suit. “If the company materially misled the public about its financials in the run up to the IPO, than the underwriters are also responsible,” said Jacob Zamansky, a veteran securities lawyer in New York.
While many are saying that Groupon is a victim of its own shifty accounting, Bloomberg reporter Doug MacMillan added an interesting statistic for context. “Groupon joins 12% of companies who disclosed weakness in financial controls w/in 1 yr of IPO since 2004 says Audit Analytics. 15% w/in 2 yrs,” he tweeted yesterday.
The case is embedded below.