Every company about to go public has to endure a fair amount of scrutiny, and there are always a few pre-IPO jitters. But what’s happening with Groupon is unprecedented, and the hits just keep coming.

Groupon

Back in June, when it was still the fastest growing company with a 2,241 percent growth in 2010, Groupon pocketed $950 million from private investors and filed for a $750 million public offering.

Given the company’s size ($713.4 million in 2010 revenue) and market reach (115 million subscribers as of Q2 2011; launched in 34 new countries and 500 new markets in 2010), that is impressive.

But then the hits started coming in, including accusations of creative accounting, a growth slowdown, lack of cash on hand, a privacy inquiry from lawmakers, a false ad lawsuit, a whole bunch of fired employees in its China partnership, and lastly—a wobbly valuation that swung wildly from $15 billion to $25 billion, then $30 billion and back down to $16 billion.

Most companies would be unable to respond adequately to such a barrage of serious accusations and negative publicity. But it is even more difficult for Groupon given that SEC regulations make it hard for companies that have just filed for an IPO to disclose new information to the media that is not disclosed in its filing.

This basically means that anytime Groupon feels like it has to refute an allegation, it would have to go back to the SEC with an amended filing. This is why the company has been mostly quiet while the media has had a field day with all the “Groupon is in trouble” stories.

Groupon did make a few quick changes, such as bringing in executives from its German acquisition Citydeal to manage sales. Citydeal was previously used by Groupon to kick off its international operations.

Now, Groupon CEO and co-founder Andrew Mason has had enough and penned a long memo to employees wherein he tackles the allegations head-on. There’s a lot to digest in the letter, but as far as the Groupon IPO and the travel industry are concerned, the following excerpts should be enough.

“For now we must patiently and silently endure a bit more public criticism as we prepare to birth this IPO baby — a breed for which there are no epidurals. If there’s a silver lining, it’s that we’re almost on the other side, and the negativity leaves us well-positioned to exceed expectations with an IPO baby that, having seen the ultrasound, I can promise you is not one of those uglies.”

And this: “Groupon Getaways will do $10M in its first calendar month — which you might think is awesome, but we’re actually disappointed with those results because we know how much better we’ll be doing soon.”

Once it gets past the IPO, things will indeed be a lot easier for Groupon. Given the performance of the Groupon Getaways partnership with Expedia, Groupon now has a firm foothold in the travel industry, regardless of its overall growth slowdown and other problems.

Photo - wovox

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