Groupon puts IPO on hold

Daily deals Web site Groupon Inc. has put its initial public offering on hold while there is volatility in the stock market, an anonymous source has told the Wall Street Journal.

The Chicago-based company, which has been expected to have a market valuation of around $20 billion, has canceled the investor roadshow it had scheduled for next week, and will reevaluate the timing of its IPO on a week-by-week basis, the source said. Originally, Groupon planned to go public after Labor Day and price its shares in mid-September, the Wall Street Journal reports.

The source also told the Wall Street Journal that the U.S. Securities and Exchange Commission had contacted a Groupon lawyer last week with questions about a recently leaked memo from Groupon CEO Andrew Mason.

According to the Guardian:

As Groupon prepared the IPO, which had been expected as early as this month, criticism of the firm's accounting and long-term prospects grew.

The company was running out of cash, facing mounting competition from Amazon and others, and failing to make the grade in China, according to various reports.

Mason fired back at critics in an internal email that was immediately leaked to AllThingsD, the tech site owned by the Wall Street Journal. The leak appears to have broken US financial rules that limit what executives in a firm planning an IPO can say ahead of the flotation.

Groupon executives were not commenting on the Wall Street Journal’s article on Tuesday, Marketwatch reports.

"This has got to be the botch-up of the century," Forrester research analyst Sucharita Mulpuru, a long-time critic of Groupon, told the Guardian. "What most surprises me is that they have done this to themselves. They seem to have come undone, Icarus-like, because they flew too close to the sun – and not because they were asking for too much money."

Jeffrey Sica, president at Sica Wealth Management LLC, told the Wall Street Journal that SEC scrutiny was likely a factor in delaying the IPO. “If [Mason] does go on the road now and begin to spend the entire roadshow defending himself and defending what he did in sending this email to thousands of employees, that takes away from what I want to hear about at a roadshow: How do you make money, how do you grow, how do you fit into a changing world," he said.

There were an average of 12 IPOs worth $4.2 billion a month through July of this year, the Wall Street Journal reports, but only three IPOs worth $867 million in August. Thirteen IPOs have been postponed since August.