Groupon Plunges as Board Members Reportedly Leaving • Hacker News Board

Re: Groupon Plunges as Board Members Reportedly Leaving

#41

Post by trotsky » Mon, Apr 30, 2012, 10:49 PM UTC

ahi wrote: post #38

trotsky wrote: post #28

Earlier quoted context omitted.

For what it's worth, these two were both on the audit committee which was criticized in the wake of the earnings restatements last month: "Groupon needs a new audit committee with much more financial expertise," said James Post, a management professor at Boston University. http://articles.chicagotribune.com/2012-04-12/business/chi-g...

I don't really buy that. If CFO and auditors are doing their job any reasonably competent business professional can provide adequate oversight. If the board member isn't capable of adequate oversight the problem lies with the financial information they are being given, very rarely the board members.

You're not really providing much oversight if you're only able to detect problems when they're pointed out to you.

Enron's audit committee was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to properly question the auditors on accounting questions related to the company's special purpose entities. The committee was also unable to question the company's management due to pressures placed on the committee.[59] The Permanent Subcommittee on Investigations of the Committee on Governmental Affairs' report accused the board members of allowing conflicts of interest to impede their duties as monitoring the company's accounting practices. When Enron fell, the audit committee's conflicts of interest were regarded with suspicion.[60]

https://en.wikipedia.org/wiki/Enron_scandal#Audit_committee

Re: Groupon Plunges as Board Members Reportedly Leaving

#42

Post by mkr-hn » Mon, Apr 30, 2012, 10:54 PM UTC

tedsuo wrote: post #29

To what degree were people predicting the fall of pets.com before it happened? Anyone remember? I think that's the key insight into how the fallout of a groupon meltdown would affect the rest of the industry.

Good place to start: https://www.google.com/#q=pets.com+bubble&hl=en&prmd...

Re: Groupon Plunges as Board Members Reportedly Leaving

#43

Post by joering2 » Mon, Apr 30, 2012, 11:04 PM UTC

chrisacky wrote: post #31

Big fat I told you so (to anyone on HN I've predicted this to in the past)... Board Member/Director leaves... and what this signals: [1] Employees Confused. [2] Investors are going to really pissed off. [3] Stock is most likely going to continue to fall. (The signalling from this step down is huge). [4] It hints at possibility that the directors have had something to hide; something has been discovered; they have bee…

anyone would want to invent a time machine for a cool $5 billion dollars?? because that much Andrew Mason would pay you to get back to the table split seconds before he said "no" to Google's "we will pay you $6 billions for your website".

Re: Groupon Plunges as Board Members Reportedly Leaving

#44

Post by moocow01 » Mon, Apr 30, 2012, 11:17 PM UTC

I wonder if the true bubble is just the number of shady businesses run by shady executives on shady accounting principles.

Re: Groupon Plunges as Board Members Reportedly Leaving

#45

Post by xxbondsxx » Mon, Apr 30, 2012, 11:19 PM UTC

joering2 wrote: post #43

chrisacky wrote: post #31

Big fat I told you so (to anyone on HN I've predicted this to in the past)... Board Member/Director leaves... and what this signals: [1] Employees Confused. [2] Investors are going to really pissed off. [3] Stock is most likely going to continue to fall. (The signalling from this step down is huge). [4] It hints at possibility that the directors have had something to hide; something has been discovered; they have bee…

anyone would want to invent a time machine for a cool $5 billion dollars?? because that much Andrew Mason would pay you to get back to the table split seconds before he said "no" to Google's "we will pay you $6 billions for your website".

Rumor has it that Google got a look at their books during the negotiation and cancelled the deal. They publicly gave the story of groupon denying Google to allow them to save face and attract more investors

Re: Groupon Plunges as Board Members Reportedly Leaving

#46

Post by ahi » Mon, Apr 30, 2012, 11:31 PM UTC

trotsky wrote: post #41

ahi wrote: post #38

Earlier quoted context omitted.

I don't really buy that. If CFO and auditors are doing their job any reasonably competent business professional can provide adequate oversight. If the board member isn't capable of adequate oversight the problem lies with the financial information they are being given, very rarely the board members.

You're not really providing much oversight if you're only able to detect problems when they're pointed out to you. Enron's audit committee was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to properly question the auditors on accounting quest…

I think Enron is actually a good example of what I mean. I maintain that any generally competent professional can have any legitimate accounting practice explained to them. "I don't get it, tell me where these numbers are coming from," will pretty much suffice. Enron's audit committee simply failed to ask the questions (due to laziness or conflicts). Enron's special purpose entities were sitting in the SEC filings waiting to be found by anyone. As soon as the WSJ reporters asked about them Enron started to implode. The SPEs did not make sense and they fell apart without much more than "wtf?"

Needing financial engineers on your audit committee is a giant red flag that your financials don't make sense.

http://www.amazon.com/Days-Reporters-Uncovered-Destroyed-Cor... (Probably not worth the read. Enron short nags WSJ reporters about WTF SPEs in Enron filings. WSJ finally asks Enron and gets gobbledygook instead of explanation. Boom.)

Re: Groupon Plunges as Board Members Reportedly Leaving

#47

Post by mikeash » Mon, Apr 30, 2012, 11:32 PM UTC

fennecfoxen wrote: post #40

mikeash wrote: post #32

Earlier quoted context omitted.

Seems like any financial structure that isn't indefinitely sustainable gets described as a "Ponzi scheme" these days. What that post describes isn't a Ponzi scheme at all. The defining characteristic of such a thing is using the money from new investors to pay returns to old investors, thus making the investment appear legitimate. It's completely unrelated to Facebook advertising. Maybe their business model is unsust…

I'm not even sure that their business model is unsustainable. The growth that would be necessary to justify their current valuation is probably unsustainable, mind you. But there's easily a good little business there. It just happens to not be worth 7 billion dollars :)

Same here. I was really skeptical of the claim that Facebook advertising isn't worth the money. I think it's far more likely that it is worth the money if you sell the right sort of thing, and this guy just moved in circles where people didn't sell things that advertised well on Facebook.

However, the "Ponzi" thing stuck out at me much harder.

Re: Groupon Plunges as Board Members Reportedly Leaving

#48

Post by trotsky » Mon, Apr 30, 2012, 11:49 PM UTC

ahi wrote: post #46

trotsky wrote: post #41

Earlier quoted context omitted.

You're not really providing much oversight if you're only able to detect problems when they're pointed out to you. Enron's audit committee was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to properly question the auditors on accounting quest…

I think Enron is actually a good example of what I mean. I maintain that any generally competent professional can have any legitimate accounting practice explained to them. "I don't get it, tell me where these numbers are coming from," will pretty much suffice. Enron's audit committee simply failed to ask the questions (due to laziness or conflicts). Enron's special purpose entities were sitting in the SEC filings wa…

I think you make a good point, but it still leaves open the idea that groupon may have made these changes to combat a (perceived) weakness in the committee.

Re: Groupon Plunges as Board Members Reportedly Leaving

#49

Post by mikeryan » Mon, Apr 30, 2012, 11:49 PM UTC

joering2 wrote: post #43

chrisacky wrote: post #31

Big fat I told you so (to anyone on HN I've predicted this to in the past)... Board Member/Director leaves... and what this signals: [1] Employees Confused. [2] Investors are going to really pissed off. [3] Stock is most likely going to continue to fall. (The signalling from this step down is huge). [4] It hints at possibility that the directors have had something to hide; something has been discovered; they have bee…

anyone would want to invent a time machine for a cool $5 billion dollars?? because that much Andrew Mason would pay you to get back to the table split seconds before he said "no" to Google's "we will pay you $6 billions for your website".

Actually most of the early investors who would have won in that deal got a lot of money out from the later stage investors and more in the IPO.

I'm not sure they'd have made more in that deal. Honestly most of the folks invested early made a ton of money and now the guys at the backend are looking for a chair as the music ends.

Re: Groupon Plunges as Board Members Reportedly Leaving

#50

Post by OzzyB » Mon, Apr 30, 2012, 11:50 PM UTC

xxbondsxx wrote: post #45

joering2 wrote: post #43

Earlier quoted context omitted.

anyone would want to invent a time machine for a cool $5 billion dollars?? because that much Andrew Mason would pay you to get back to the table split seconds before he said "no" to Google's "we will pay you $6 billions for your website".

Rumor has it that Google got a look at their books during the negotiation and cancelled the deal. They publicly gave the story of groupon denying Google to allow them to save face and attract more investors

That's very unnerving if it's true, because, by going along with "Groupon is worth $6bn because Google offered that to us and we turned it down", implies Google had a hand in creating that extremely high perception before their IPO.

If Google did infact have the chance to look at the books (which I'm sure they did), and then allow that "$6bn meme" to circulate -- well, that's evil isn't it?