Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Groupon: CEO Andrew Mason Isn't the Only Problem

By

Groupon's problems go beyond Mason's performance in the CEO role and extend into areas that are completely beyond the ability of any board of directors to control.

PrintPRINT
Pity the poor Groupon (NASDAQ:GRPN) investor.

Anyone who got caught up in the hype surrounding the IPO of the daily deals company just a little more than a year ago and held on to his shares is now sitting on a loss of more than 80%. A recent rally in the company's stock price, amidst reports that Groupon's board would meet to discuss replacing thirtysomething CEO Andrew Mason, may have helped psychologically but it only put a tiny dent in the losses that virtually every current shareholder has experienced owning the stock over the last 12 months.

That board meeting last week ended with directors deciding not to make any change in the company's leadership, a decision that has already contributed to fresh declines in Groupon's stock price. It ended the week at only $4.14 a share, down 84% from its closing peak above $26 from November 2011.

It's not likely that the board views Mason's leadership through the same rose-colored glasses that he himself donned. At a New York conference last week, the CEO said that, "if I ever thought I wasn't the right guy for the job, I'd be the first person to fire myself." (Reality check: How many people are quite that honest with themselves? And how many CEOs are ever that honest in evaluating their own tenure? That's why boards of directors exist in the first place….) But some on the board have reportedly been looking for Mason to be "more aggressive and public" about the company's turnaround efforts, as Kara Swisher at AllThingsD reported.

It is hardly surprising that Mason's leadership came up for discussion at the board level, and I would have given a lot to be a fly on the wall during the no doubt heated conversation that took place. After all, if you founded a company, took it public, invested in it over the four years of its existence and then watched its stock price flounder, you're going to want to hold someone responsible for the stock's disastrous performance.

But the problem here goes well beyond Mason's performance in the CEO role and extends into areas that are completely beyond the ability of any board of directors to control. And some of these involve lessons that we all should have learned more than a decade ago, after the dot-com bubble burst.

Let's start with Groupon's rapid rise as a brand new company in a brand new industry. While it isn't a dot-com that went from being launched to being a publicly traded startup company within a mere 18 months, as happened in the final stages of the dot-com frenzy, it simply went public prematurely.

When a baby is born prematurely, the infant is placed in an incubator and shielded from the harsh external environment, provided with round-the-clock nursing care and precisely the kind of nourishment needed to help him develop his vital organs. In contrast, a newly public company is shoved into the market and forced to compete for capital and the attention of investors.
< Previous
No positions in stocks mentioned.
PrintPRINT

Busy? Subscribe to our free newsletter!

Submit
 

WHAT'S POPULAR IN THE VILLE