According to CNBC, Groupon is technically insolvent. The opinion is based on a quick scan of the latest SEC filing which raises plenty of red flags, including falling revenue growth and an apparent attempt to dress the company up for the IPO by lowering operating expenses. CNBC says:
That last one is really something. In the fine print of its filing, the company says: “The improvement in North American operating income [41 percent of nine-month revenue] was the result of our ability to decrease marketing expenses…in addition we were able to decrease our operating expenses at a lower rate than our revenue growth.”
But that slide in expenses is fleeting. The company also says elsewhere in the filing that “we anticipate our operating expenses will increase substantially in the foreseeable future as we continue to invest to increase our subscriber base.”
But back to our grumpy old accountants and the technical insolvency: I had a few questions about their write-up—specifically, what the 64 percent leverage meant and, by virtue of going public, aren’t most companies seeking an IPO technically insolvent?