Groupon shares rebound after founder is sacked

  • 1 March 2013
  • From the section Business

Shares in daily deals firm Groupon have risen 13% following the ousting of its founder and chief executive Andrew Mason.

Its shares lost a quarter of their value on Thursday after the company reported falling sales and profit margins after the close on Wednesday.

By mid-morning on Friday the shares had risen to $5.10.

However, when the company floated in 2011 they were sold at nearer $20, valuing the firm at $13bn.

The departure of founder and chief executive of Groupon, Andrew Mason, had been widely expected.

The online firm, which offers discounts to subscribers on local goods and services such as meals and beauty treatments, posted another quarterly loss this week.

Investors fear its business model, which is increasingly copied by competitors including Amazon, may be unsustainable.

Gartner analyst Michael Gartenberg said the model was too easy to replicate: ``The question is whether this as a business model can last.

`It's easy to replicate and under a lot of pressure. The question is where the company goes from here.... Clearly something wasn't working, isn't working.''

Some retailers have complained that the company takes too big a cut of the offer price, although it has recently reduced this from 40% to 35%.

However, news of that lower margin was one of the key reasons for the share price fall as it led investors to fear it would take even longer for the company to become profitable.

The challenge for Groupon, and its competitors, is to keep the businesses happy through the amount of profit it can make from the people it brings in, but also to keep the users of the offers happy by giving them a genuinely discounted product.

Groupon is seen as having high marketing expenses and a large employee base, with more than 11,000 employees.

It attracted the notice of regulators over its reporting as revenue the total amount its customers spent on deals rather than the amount it made from them.

It had to restate the accounts, and new documents showed that net revenue in the first half of 2011 was around half of what was originally reported.

It made its only profit in the second quarter of last year.

Mr Mason, who set the firm up in 2008, is a colourful character who was once photographed for a leading magazine with a cat on his head.

His departure note to employees, stated: "After four and a half intense and wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding - I was fired today. If you're wondering why... you haven't been paying attention."

Groupon's executive chairman Eric Lefkofsky and vice chairman Ted Leonsis are stepping in as temporary joint chief executives until a replacement for Mr Mason can be found.

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