Groupon Inc, which runs the world's largest online coupon website, was sued on Tuesday by a shareholder who accused the company of misleading investors about its financial prospects and concealing weak internal controls.
The lawsuit was filed four days after Groupon unexpectedly revised its results for the fourth quarter, its first as a public company, and said it had a "material weakness" in its internal controls because of a failure to set aside enough money for customer refunds.
According to a complaint filed in federal court in Groupon's hometown of Chicago, the company overstated revenue, issued materially false and misleading financial results, and concealed how its business was not growing as fast and was not nearly as resistant to competition as it suggested.
Groupon also did not reveal its "poor and inadequate" internal controls, and concealed in its registration statement and prospectus for its November 2011 initial public offering that it did not comply with various countries' laws, the complaint said.
Julie Mossler, a Groupon spokeswoman, was not immediately available for comment. The company has said it does not discuss pending litigation. Several other law firms have said they may file similar lawsuits.
Shares of Groupon, which lost 16.9 percent on Monday after the company announced late Friday its results revision, fell 1.7 percent on Tuesday to close at $15.02. The stock is now roughly 25 percent below the $20 IPO price.
The lawsuit seeks class-action status on behalf of shareholders who acquired Groupon shares between November 4, 2011 and March 30, 2012.
Among the other defendants are Groupon Chief Executive Andrew Mason and several banks that helped take the company public, including lead IPO underwriters Credit Suisse , Goldman Sachs and Morgan Stanley .
The plaintiff is Fan Zhang, who said he paid nearly $61,800 for 3,000 Groupon shares in February, and sold them in March at a loss of more than $9,000.
The case is Zhang v. Groupon Inc, U.S. District Court, Northern District of Illinois, No. 12-02450.
First Published On : Apr 4, 2012 11:34 IST