Groupon Board Shakeup: Schultz, Efrusy Replaced

By Alistair Barr

April 30 (Reuters) - Groupon Inc appointed two new directors on Monday and said Starbucks Corp Chief Executive Howard Schultz and venture capitalist Kevin Efrusy were leaving the board as the company tries to address criticism of its accounting practices.

Groupon said Robert Bass, a Deloitte LLP vice chairman, and Daniel Henry, chief financial officer of the American Express Co , will join its board and serve on the audit committee. Henry joined last Friday. Bass needs to be elected at the June shareholders' meeting.

Groupon shares fell more than 10 percent to finish at $10.71 on the Nasdaq following the board news shortly before the closing bell. In after-hours trading, the stock edged up 4 cents to $10.75.

"People were hoping they were going to augment the board rather than replace directors," said Daniel Ernst, an analyst at Hudson Square Research, who noted the loss of Starbucks' Schultz was a particular blow.

"It was great to have Schultz on Groupon's board, so it's not great to lose him," Ernst added. "Schultz is a very successful retail and consumer entrepreneur and company manager."

Maveron, an investment firm Schultz co-founded in 1998, was an investor in Groupon before the company's IPO. Schultz said in a statement on Monday that he was leaving Groupon's board to focus on "other time commitments."

The world's largest daily deals company came under renewed fire in March after revising its fourth-quarter financial results and admitting to a "material weakness" in its financial statements, months after its high-profile IPO.

Groupon's audit committee was criticized because some members are busy executives who may not have enough time to devote to fixing the company's accounting problems.

Henry, 62, was a partner at accounting firm Ernst & Young before joining American Express.

Bass, also 62, has been a vice chairman of accounting firm Deloitte LLP since 2006. He is due to retire from Deloitte on June 2.

While the board departures were negative, the appointment of accounting specialists, especially Amex's Henry, will help Groupon, according to Herman Leung, an analyst at Susquehanna Financial Group.

"He's the kind of guy who can provide a little bit of adult supervision for the company on the accounting side," Leung added.

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Comments

[parabq]

10:58 AM on 05/01/2012

Bad management and bad business model = get out now !

[RedneckDem]

09:30 AM on 05/01/2012

I have a buddy who went to work for them and he quit after 90 days. His commissions were late, they were very unorganized and they had people in positions who had no idea what they were doing. He met all of their sales goals, but couldnt get paid.

IMO companies like these are the problem. They want small biz to give steeper and steeper discounts to the point that they cannot survive. In the end the big boxes or chain restaurants will have an even larger share of market.

[Roommate]

09:24 AM on 05/01/2012

Groupon stock holders lost 60% of their money from initial IPO day. This company had a loss of $279.43 million in 2011. Buying this company is like buying GM

[To Tall Jones]

08:43 AM on 05/01/2012

I will never understood why Groupon didn't take the offer from Google when they tried to buy them. They will probably regret not taking in the offer if they don't already.

[kurios]

08:12 AM on 05/01/2012

just wondering when the SEC investigation of the IPO will hit the airwaves...this smelled of fraud from day one

[iam7545 r]

08:03 AM on 05/01/2012

Another scam that the geniuses on Wall Street and the SEC didnt understand. so investors got burned. I tried a deal and the company was 100% disreputable and was a disaster. I dont need someone else to find lousy companies to deal with - I do fine on my own,

[uninterestedbystander]

07:51 AM on 05/01/2012

The only value this company has is its' user data - which is questionable.

[keemia]

02:50 AM on 05/01/2012

If/when the push comes to shove, the departed board members will still be responsible for the company's financial accountability. I'm surprised they're taking off.

[vespachild]

01:28 AM on 05/01/2012

Greed fueling the internet bubble once more.

[luvbrothel]

11:37 PM on 04/30/2012

I've never cared for these types of 'services' - my brother-in-law used Groupon to promote his spa, and the packages sold rather quickly, but then there were all these scheduling conflicts with hundreds of people trying to make appointments right away, and it got pretty ugly at times. In the end, Groupon took a whopping 35% of the sales, and he pretty much just broke even with hardly any return customers. I think that's just the salon crowd, though, as they seem to be a twisted sort, looking for bargain pampering anywhere they can get it.

[roger37]

12:17 AM on 05/01/2012

I was in the brand management business for thirty years, and I could never fathom why any brand manager would want to drop coupons to his own users. I mean, like, the idea of dropping coupons is to get people to TRY your product, either new users of the product category or users of your competitors. If you coupon your own user, you're just subsidizing them, and it doesn't add anybody to your user base. Duh.

[abacsik]

09:19 AM on 05/01/2012

I bought one groupon and called the company (which I already use) before buying it to verify it was legit. As an existing customer it's great to get the discount (three days of dog boarding for price of two) but if groupon is taking that much of the money they'd be better off promoting the same deal on their own website. Rewarding existing customers is a good brand management practice too -- it keeps us happy and coming back, and we share positive info on the company with friends. Your customers own facebook pages are probably a better place for such coupon distribution -- offer them a deal and have them share the link with friends they know would use the service.

[greybees]

10:40 PM on 04/30/2012

The future for Groupon looks funereal.

[macmanchgo]

10:31 PM on 04/30/2012

How hip can a company be when it is being directed by a bunch of old timers? It makes me wonder.

[Marcin A Mazurek]

11:00 PM on 04/30/2012

hip enough to break one? I guess?
:btdmp - pshhh:

[kaykaythere]

10:28 PM on 04/30/2012

And here I thought they were going to announce their plans to join names with Paul Ryan to offer an even better Groupon Deal for our Seniors. Groupon & Grub for Granny

[roger37]

12:19 AM on 05/01/2012

Hey, don't laugh. This is Paul Ryan's alternative to the Affordable Care Act (Obamacare to the propangada-suckers).

[roger37]

12:19 AM on 05/01/2012

Woops. Propaganda.

[swester]

10:01 PM on 04/30/2012

Ah, another house of cards comes falling down. This company (and its copycat competitors) is about as financially sound as a Ponzi scheme.

[WhatWhat1]

09:52 PM on 04/30/2012

Seems unthinkable, but Groupon turned away from a $5.6 billion offer when Google tried to acquire them less than two years ago.
Aaah youth.