The checkered past of Groupon's chairman
Groupon's largest shareholder and chairman, Eric Lefkofsky, has a back story investors might want to know. FORTUNE — “Lets start having fun... lets get funky... let's announce everything... let's be WILDLY positive in our forecasts …
Context & Ripple Effects
Groupon filed its S-1 on June 3 seeking $750 million, disclosing quarterly losses of $117 million on $644 million in revenue — a burn rate critics already called unsustainable, with some invoking the word 'Ponzi scheme,' even as at least one analyst argued a $25 billion valuation was defensible on its dual-sided network effect.
Into that contested valuation fight, Fortune drops a profile of chairman and largest shareholder Eric Lefkofsky built around his own emails urging 'WILDLY positive in our forecasts,' and TechCrunch amplifies the same story the day it lands, foregrounding a merchant who calls Groupon 'the single worst decision I have ever made as a business owner.' For an offering still weeks from pricing, the piece converts governance and founder credibility into a live underwriting question.
First-order effects
- IPO investors must now price Lefkofsky himself, not just the financials: his role as largest shareholder and chairman, and the 'wildly positive forecasts' email, become diligence items alongside the disclosed $117 million quarterly loss.
- Groupon's bankers and Andrew Mason face a roadshow narrative where the bullish $25 billion network-effect case has to be argued past both the burn-rate math and the chairman's documented forecasting language.
Second-order effects
- Competing dealmakers and rival consumer-web issuers will feel the spillover: if Groupon prices below its bulls' target because of credibility questions, every 2011 consumer-internet filing inherits a stricter read on founder emails and internal projections.
- Merchants — the supply side of Groupon's two-sided market — gain negotiating leverage as coverage like the 'worst decision' merchant quote circulates, pressuring the terms Groupon offers to sustain growth.
Third-order effects
- If the pattern holds, pre-IPO journalism on founder conduct becomes a standard input into hot tech valuations, forcing issuers to treat internal communications as disclosure risk rather than private history — a structural shift in how late-stage companies prepare for public markets.
The trend: As consumer-internet companies rush to file in 2011, scrutiny of founders' own words is becoming as material to IPO valuations as the financials themselves.