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FINRA's interest in Groupon: Investigation or standard practice?

May 18, 2012|By Tiffany Hsu
  • Employees at Groupon Inc. pose with the company logo. A Wall Street Journal report says regulators may be probing a pre-earnings Groupon stock surge.
Employees at Groupon Inc. pose with the company logo. A Wall Street Journal… (Charles Rex Arbogast / Associated…)

Just before reporting bullish earnings after the close of trading Monday,Groupon Inc.stock soared 18.5% during its trading day. Does that a FINRA probe make? Hard to say.

The Wall Street Journal, quoting a source familiar with the matter, is reporting that the Financial Industry Regulatory Authority has launched a probe into the matter. Trading volume at the daily deals company spiked far above the norm Monday to 16.5 million shares.  

FINRA is staying mum. Groupon declined to comment. The Journal report said that regulators have yet to decide whether to take up the issue with the Securities and Exchange Commission.

Is this a sign that something fishy may have happened before the earnings announcement? Groupon said its first-quarter revenue soared nearly 90% to $559.3 million and that its loss narrowed to $11.7 million, or 2 cents a share, from a loss of $146.5 million, or 48 cents a share.

It wouldn’t be the first time Groupon’s finances were out of whack. In March, the Chicago company reported “material weakness” in its internal controls and was forced to restate its fourth-quarter and 2011 results. Last month, Groupon shook up its executive ranks and board as it fought to repair its reputation.    

Since going public in November priced at $20 a share, Groupon has been heading steadily downward. But the stock soared to $11.74 a share Monday after closing at $9.90 on May 11 and has been trading higher since.

Still, there’s also a good chance that FINRA, which regularly examines major earnings announcements, is at the moment just doing with Groupon what it does with any other buzzy company. A full investigation into potential stock manipulation or other misdeeds would likely take months.

Regardless, Groupon’s stock took a hit Friday, trading down 5.4%, or 67 cents at $11.74 a share in midday trading in New York.


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