Zhang v. Groupon, Inc. et al

Filing 1

COMPLAINT filed by Fan Zhang; Jury Demand. Filing fee $ 350, receipt number 0752-7011418. (Attachments: # 1 Plaintiff certification)(Barz, James)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FAN ZHANG, Individually and on Behalf of
All Others Similarly Situated,

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Plaintiff,
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vs.
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GROUPON, INC., ANDREW D. MASON,
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JASON E. CHILD, JOSEPH M. DEL PRETO, )
ERIC P. LEFKOFSKY, THEODORE J.
)
LEONSIS, PETER J. BARRIS, KEVIN J.
)
EFRUSY, MELLODY HOBSON, BRADLEY )
A. KEYWELL, HOWARD SCHULTZ,
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MORGAN STANLEY & CO. LLC,
)
GOLDMAN, SACHS & CO., CREDIT
)
SUISSE SECURITIES (USA) LLC, ALLEN &)
COMPANY LLC, MERRILL LYNCH,
)
PIERCE, FENNER & SMITH
)
INCORPORATED, BARCLAYS CAPITAL )
INC., CITIGROUP GLOBAL MARKETS
)
INC., DEUTSCHE BANK SECURITIES
)
INC., J.P. MORGAN SECURITIES LLC,
)
WELLS FARGO SECURITIES, LLC,
)
)

No.

DEMAND FOR JURY TRIAL

[Caption continued on following page.]
PLAINTIFF’S CLASS ACTION COMPLAINT FOR VIOLATION
OF THE FEDERAL SECURITIES LAWS

WILLIAM BLAIR & COMPANY L.L.C.,
LOOP CAPITAL MARKETS, INC., RBC
CAPITAL MARKETS LLC and THE
WILLIAMS CAPITAL GROUP, L.P.,
Defendants.

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Plaintiff has alleged the following based upon the investigation of plaintiff’s counsel, which
included a review of United States Securities and Exchange Commission (“SEC”) filings by
Groupon, Inc. (“Groupon” or the “Company”), as well as regulatory filings and reports, securities
analysts’ reports and advisories about the Company, press releases and other public statements
issued by the Company, and media reports about the Company, and plaintiff believes that substantial
additional evidentiary support will exist for the allegations set forth herein after a reasonable
opportunity for discovery.
NATURE OF THE ACTION
1.

This is a securities class action on behalf of all persons who purchased or otherwise

acquired the common stock of Groupon between November 4, 2011 and March 30, 2012, inclusive
(the “Class Period”), and/or who acquired shares of Groupon common stock pursuant or traceable to
the Company’s false and misleading Registration Statement and Prospectus issued in connection
with its November 4, 2011 initial public offering (“IPO”), seeking to pursue remedies under the
Securities Act of 1933 (“1933 Act”) and the Securities Exchange Act of 1934 (“1934 Act”).
2.

Groupon is a local e-commerce marketplace that connects merchants to consumers by

offering goods and services at a discount.
3.

During the Class Period, defendants issued materially false and misleading statements

regarding the Company’s business practices and financial results. Specifically, defendants failed to
disclose negative trends in Groupon’s business and made false statements as to Groupon’s financial
results. As a result of these false statements, defendants were able to successfully accomplish
Groupon’s IPO at $20.00 per share, and subsequently Groupon’s stock traded at artificially inflated
prices during the Class Period, reaching a high of $26.19 per share on November 18, 2011.
4.

On November 3, 2011, Groupon announced the pricing of its IPO of 35 million shares

of common stock at $20 per share (not including an overallotment option granted to the underwriters
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to purchase up to an additional 5.25 million shares), for net proceeds of $658 million, pursuant to the
IPO.
5.

As part of the Prospectus and Registration Statement issued in connection with the

IPO and during the Class Period, defendants represented that the Company had competitive
advantages which would benefit its business and reported financial results which showed dramatic
growth.
6.

On March 30, 2012, after the market closed, Groupon issued a press release

announcing a revision to its fourth quarter and full year 2011 financial results. The Company
reported a reduction in its fourth quarter 2011 revenue of $14.3 million after initially reporting sales
of $506.5 million. This resulted in an increase to Groupon’s fourth quarter 2011 operating expenses
that reduced operating income by $30 million, net income by $22.6 million, and earnings per share
(“EPS”) by $0.04. Groupon attributed the revisions to a shift in the Company’s fourth quarter deal
mix and higher price point offers, which resulted in higher refund rates.
7.

On this news, Groupon’s stock dropped $3.10 per share to close at $15.28 per share

on April 2, 2012, a decline of 17% on volume of 10 million shares.
8.

The true facts, which were known by the defendants but concealed from the investing

public during the Class Period, were as follows:
(a)

Groupon’s financial results were materially false and misleading in violation

of Generally Accepted Accounting Principles (“GAAP”);
(b)

Groupon’s revenues were overstated in violation of GAAP;

(c)

Groupon’s business was not growing to the extent represented by defendants

and was not nearly as resistant to competition as suggested by defendants;

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(d)

The IPO Registration Statement and Prospectus concealed that Groupon was

not in compliance with the laws and regulations of some of the countries in which it operated,
including the United Kingdom; and
(e)

Groupon’s internal controls were so poor and inadequate that Groupon’s

reported results were not reliable.
9.

As a result of defendants’ false statements, Groupon’s stock traded at inflated levels

during the Class Period. However, after the above revelations seeped into the market, the
Company’s shares were hammered by massive sales, sending them down 41% from their Class
Period high.
JURISDICTION AND VENUE
10.

The claims asserted herein arise under and pursuant to §§11 and 15 of the 1933 Act

[15 U.S.C. §§77k and 77o], and §§10(b) and 20(a) of the 1934 Act [15 U.S.C. §§78j(b) and 78t(a)]
and SEC Rule 10b-5 [17 C.F.R. §240.10b-5]. This Court has jurisdiction over the subject matter of
this action pursuant to 28 U.S.C. §1331, §27 of the 1934 Act and §22 of the 1933 Act.
11.

Venue is proper in this District pursuant to 28 U.S.C. §1391(b), because defendants

maintain an office in this District and many of the acts and practices complained of herein occurred
in substantial part in this District. Groupon has offices located at 600 W. Chicago Avenue, Suite
620, Chicago, Illinois 60654.
12.

In connection with the acts and conduct alleged in this complaint, defendants, directly

or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited
to, the mails and interstate wire and telephone communications.

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PARTIES
13.

Plaintiff Fan Zhang, as set forth in the accompanying certification and incorporated

by reference herein, purchased the common stock of Groupon during the Class Period and has been
damaged thereby.
14.

Defendant Groupon operates an e-commerce marketplace that connects merchants to

consumers by offering goods and services at a discount in North America and internationally.
Groupon is headquartered in Chicago, Illinois. Its stock trades in an efficient market on the
NASDAQ.
15.

Defendant Andrew D. Mason (“Mason”) co-founded the Company and serves as

Chief Executive Officer (“CEO”) and a director of Groupon. Defendant Mason signed or authorized
the signing of the false and misleading Registration Statement.
16.

Defendant Jason E. Child (“Child”) serves as Chief Financial Officer (“CFO”) of

Groupon. Defendant Child signed or authorized the signing of the false and misleading Registration
Statement.
17.

Defendant Joseph M. Del Preto (“Del Preto”) serves as Chief Accounting Officer of

Groupon. Defendant Del Preto signed or authorized the signing of the false and misleading
Registration Statement.
18.

Defendant Eric P. Lefkofsky (“Lefkofsky”) co-founded the Company and serves as

Executive Chairman of the Board. Defendant Lefkofsky signed or authorized the signing of the false
and misleading Registration Statement.
19.

Defendant Theodore J. Leonsis (“Leonsis”) serves as a director of Groupon.

Defendant Leonsis signed or authorized the signing of the false and misleading Registration
Statement.

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20.

Defendant Peter J. Barris (“Barris”) serves as a director of Groupon. Defendant

Barris signed or authorized the signing of the false and misleading Registration Statement.
21.

Defendant Kevin J. Efrusy (“Efrusy”) serves as a director of Groupon. Defendant

Efrusy signed or authorized the signing of the false and misleading Registration Statement.
22.

Defendant Mellody Hobson (“Hobson”) serves as a director of Groupon. Defendant

Hobson signed or authorized the signing of the false and misleading Registration Statement.
23.

Defendant Bradley A. Keywell (“Keywell”) co-founded the Company and serves as a

director of Groupon. Defendant Keywell signed or authorized the signing of the false and
misleading Registration Statement.
24.

Defendant Howard Schultz (“Schultz”) serves as a director of Groupon. Defendant

Schultz signed or authorized the signing of the false and misleading Registration Statement.
25.

The defendants referenced above in ¶¶15-17 are referred to herein as the “Officer

Defendants.”
26.

The defendants referenced above in ¶¶15 and 18-24 are referred to herein as the

“Director Defendants” and are named as defendants solely for violations of the 1933 Act.
27.

Defendant Morgan Stanley & Co. LLC (“Morgan Stanley”) is an investment banking

firm that offers financial advisory and security brokerage services. The firm was formerly known as
Morgan Stanley & Co. Incorporated and changed its name to Morgan Stanley & Co. LLC in June
2011. Morgan Stanley acted as lead book-running manager and underwriter for Groupon’s IPO,
helping to draft and disseminate the offering documents.
28.

Defendant Goldman, Sachs & Co. (“Goldman”) provides investment banking,

securities and investment management services to a substantial and diversified client base that
includes corporations, financial institutions, governments and high-net-worth individuals. Goldman

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acted as lead book-running manager and underwriter for Groupon’s IPO, helping to draft and
disseminate the offering documents.
29.

Defendant Credit Suisse Securities (USA) LLC (“Credit Suisse”) operates as an

investment bank in the United States. Its businesses include securities underwriting, sales and
trading, investment banking, private equity, alternative assets, financial advisory services,
investment research, and asset management. Credit Suisse acted as lead book-running manager and
underwriter for Groupon’s IPO, helping to draft and disseminate the offering documents.
30.

Defendant Allen & Company LLC (“Allen & Company”) is a boutique investment

banking firm that offers financial advisory services. Allen & Company acted as book-running
manager and underwriter for Groupon’s IPO, helping to draft and disseminate the offering
documents.
31.

Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) is

the marketing name for the global banking and global markets businesses of Bank of America
Corporation. Merrill Lynch offers trading and brokerage services; debt and securities underwriting;
debt and equity research; and advice on public offerings, leveraged buyouts, and mergers and
acquisitions. Merrill Lynch acted as book-running manager and underwriter for Groupon’s IPO,
helping to draft and disseminate the offering documents.
32.

Defendant Barclays Capital Inc. (“Barclays”) provides securities brokerage and

financial advisory services. Barclays acted as book-running manager and underwriter for Groupon’s
IPO, helping to draft and disseminate the offering documents.
33.

Defendant Citigroup Global Markets, Inc. (“Citigroup”) is a large integrated financial

services institution that through subsidiaries and divisions provides commercial and investment
banking services, commercial loans to corporate entities, and acts as underwriter in the sale of

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corporate securities. Citigroup acted as book-running manager and underwriter for Groupon’s IPO,
helping to draft and disseminate the offering documents.
34.

Defendant Deutsche Bank Securities Inc. (“Deutsche”) is the U.S. investment banking

and securities arm of Deutsche Bank AG. Deutsche provides investment banking products and
services. Deutsche acted as book-running manager and underwriter for Groupon’s IPO, helping to
draft and disseminate the offering documents.
35.

Defendant J.P. Morgan Securities LLC (“JP Morgan”) is the U.S. investment banking

arm of financial services giant JPMorgan Chase & Co. JP Morgan provides debt and equity
underwriting, M&A and corporate restructuring advisory, securities dealing and brokerage, and trade
execution services for large-market companies and institutional investors. JP Morgan acted as bookrunning manager and underwriter for Groupon’s IPO, helping to draft and disseminate the offering
documents.
36.

Defendant Wells Fargo Securities, LLC (“Wells Fargo”) is the full service investment

banking arm of Wells Fargo & Co. Wells Fargo provides investment banking services in the United
States and offers capital markets access through public offerings, private placements, and debt
offerings, which include new issue underwriting of high yield bonds and 144A private placements,
as well as market making, research, and equity trading. It also provides advisory services for mergers
and acquisitions. Wells Fargo acted as book-running manager and underwriter for Groupon’s IPO,
helping to draft and disseminate the offering documents.
37.

Defendant William Blair & Company L.L.C. (“William Blair”) is an employee-

owned financial services firm that offers investment banking, equity research, institutional and
private brokerage, and asset management to individual, institutional, and issuing clients. The firm’s
services include portfolio management, sales and trading, investment banking services, mutual

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funds, and venture capital financing. William Blair acted as book-running manager and underwriter
for Groupon’s IPO, helping to draft and disseminate the offering documents
38.

Defendant Loop Capital Markets, Inc. (“Loop Capital”) is a boutique investment

banking and brokerage firm. The firm offers corporate and public finance, financial advisory,
municipal finance, equity research, and securities sales and trading services. Loop Capital acted as
co-manager and underwriter for Groupon’s IPO, helping to draft and disseminate the offering
documents.
39.

Defendant RBC Capital Markets LLC (“RBC”) offers corporate and investment

banking services to corporations, governments, and institutions. The firm’s services include public
and private placement of debt and equity securities, strategic alliances, mergers and acquisitions
advice, corporate finance, equity and debt underwriting, and structured and project finance. RBC
acted as book-running manager and underwriter for Groupon’s IPO, helping to draft and disseminate
the offering documents.
40.

Defendant The Williams Capital Group, L.P. (“Williams”) is an investment bank

which provides equities, fixed income, corporate finance, investment management, and private
equity products and services for corporate, governmental, municipal, individual, and institutional
investors. Williams acted as book-running manager and underwriter for Groupon’s IPO, helping to
draft and disseminate the offering documents.
41.

The defendants named in ¶¶27-40 are referred to herein as the “Underwriter

Defendants.”
42.

Defendant Groupon and the Officer Defendants and the Director Defendants who

signed the Registration Statement are strictly liable for the false and misleading statements
incorporated into the Registration Statement. The Underwriter Defendants drafted and disseminated
the offering documents and were paid more than $42 million in connection therewith. The
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Underwriter Defendants’ failure to conduct an adequate due diligence investigation was a substantial
factor leading to the harm complained of herein.
FRAUDULENT SCHEME AND COURSE OF BUSINESS
43.

Defendants are liable for: (i) making false statements; or (ii) failing to disclose

adverse facts known to them about Groupon. Defendants’ fraudulent scheme and course of business
that operated as a fraud or deceit on purchasers of Groupon common stock was a success, as it: (i)
deceived the investing public regarding Groupon’s prospects and business; (ii) artificially inflated
the price of Groupon common stock; and (iii) caused plaintiff and other members of the Class to
purchase Groupon common stock at inflated prices.
BACKGROUND
44.

Groupon operates an e-commerce marketplace that connects merchants to consumers

by offering goods and services at a discount in North America and internationally. It offers deals in
140 various types of businesses, including health and beauty, food and drink, activities, events,
services, and retail. The Company sends daily emails to its subscribers regarding discounted offers
for goods and services that are targeted by location and personal preferences. Consumers can also
access its deals directly through the Company’s Website and mobile application. The Company was
founded in 2008.
45.

Prior to the IPO, Groupon emphasized its similarities to Amazon.com. During an

IPO roadshow, one Groupon executive, Jeff Holden, stated that the “parallels between Amazon and
Groupon are amazing,” referring to his prior experience working for Amazon.
DEFENDANTS’ FALSE AND MISLEADING STATEMENTS
MADE IN CONNECTION WITH THE IPO
46.

Beginning in June 2011, the Company filed a Form S-1 Registration Statement and

Amendments thereto (collectively the “Registration Statement”) in connection with its IPO, which
Registration Statement was declared effective by the SEC on November 3, 2011.
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47.

On November 3, 2011, the Company filed a Form S-1/A Registration Statement with

the SEC to facilitate the offering of 35 million shares of Groupon common stock to the public.
48.

The Prospectus for the IPO, which was part of the Registration Statement, made the

following statements about Groupon’s competitive advantages:
Our Advantage
Customer experience and relevance of deals. We are committed to providing
a great customer experience and maintaining the trust of our customers. We use our
technology and scale to target relevant deals based on individual subscriber
preferences. As we increase the volume of transactions through our marketplace, we
increase the amount of data that we have about deal performance and customer
interests. This data allows us to continue to improve our ability to help merchants
design the most effective deals and deliver deals to customers that better match their
interests.
Merchant scale and quality. In the nine months ended September 30, 2011,
we featured deals from over 190,000 merchants worldwide across over 190
categories of goods and services. Our salesforce of over 4,800 sales representatives
enables us to work with local merchants in 175 North American markets and 45
countries. We draw on the experience we have gained in working with merchants to
evaluate prospective merchants based on quality, location and relevance to our
subscribers. We maintain a large base of prospective merchants interested in our
marketplace, which enables us to be more selective and offer our subscribers higher
quality deals. Increasing our merchant base also increases the number and variety of
deals that we offer to consumers, which we believe drives higher subscriber and user
traffic, and in turn promotes greater merchant interest in our marketplace.
Brand. We believe we have built a trusted and recognizable brand by
delivering a compelling value proposition to consumers and merchants. A benefit of
our well recognized brand is that a substantial portion of our subscribers in our
established markets is acquired through word-of-mouth. We believe our brand is
trusted due to our dedication to our customers and our significant investment in
customer satisfaction.
49.

The Prospectus for the IPO made the following representations concerning Groupon’s

financial results:
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
We present below our summary consolidated financial and other data for the
periods indicated. Financial information for periods prior to 2008 has not been
provided because we began operations in 2008. The summary consolidated
statements of operations data for the years ended December 31, 2008, 2009 and 2010
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and the balance sheet data as of December 31, 2009 and 2010 have been derived
from our audited consolidated financial statements included elsewhere in this
prospectus. . . . The summary consolidated statements of operations data for the
periods ended September 30, 2010 and 2011 and the balance sheet data as of
September 30, 2011 have been derived from our unaudited consolidated financials
statements included elsewhere in this prospectus. The unaudited information was
prepared on a basis consistent with that used to prepare our audited financial
statements and includes all adjustments, consisting of normal and recurring items,
that we consider necessary for a fair presentation of the unaudited period.
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Revenue Recognition
The Company recognizes revenue from Groupons when the following criteria
are met: persuasive evidence of an arrangement exists; delivery has occurred; the
selling price is fixed or determinable; and collectability is reasonably assured. These
criteria are met when the number of customers who purchase the daily deal exceeds
the predetermined threshold, the Groupon has been electronically delivered to the
purchaser and a listing of Groupons sold has been made available to the merchant. At
that time, the Company’s obligations to the merchant, for which it is serving as an
agent, are substantially complete. The Company’s remaining obligations, which are
limited to remitting payment to the merchant and continuing to make available on the
Company’s website the listing of Groupons previously provided to the merchant, are
inconsequential or perfunctory. The Company records the net amount it retains from
the sale of Groupons after paying an agreed upon percentage of the purchase price to
the featured merchant excluding any applicable taxes. Revenue is recorded on a net
basis because the Company is acting as an agent of the merchant in the transaction.
50.

The Prospectus for the IPO also included a letter by Groupon’s CEO, which, despite a

provision that it should not be relied upon, represented the following:
Dear Groupon,
This weekend, I did a Google News search on our company—my first in
awhile. The first story that popped up was called The Fall of Groupon: Is the Daily
Deals Site Running Out of Cash? I laughed when I read the headline (in the car by
myself, weirdly). First – with this article, the degree to which we’re getting the s***
kicked out of us in the press had finally crossed the threshold from “annoying” to
“hilarious.” Second, I was struck by the irony—I had just finished a board meeting
last Wednesday saying this to myself: I’ve never been more confident and excited
about the future of our business.
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I’m going to spend the rest of this email explaining why I’m so excited. You
need some ammo to argue back against your blog-reading “friends” (silently argue in
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your mind, that is—you can’t actually say any of this yet), and I’ve been told that the
“what have you ever done with your life that’s so great?” rebuttal isn’t working as
well for you guys as it has for me. While we’ve bitten our tongues and allowed
insane accusations (like in the article above) to go unchallenged publicly, it’s
important to me that you have the context necessary to brush this stuff off.
I’ll summarize my excitement with four points: 1) Growth in our core
business is strong 2) Our investments in the future – businesses like Getaways &
NOW—look great, 3) We are pulling away from competition, and 4) We’ve built a
great team that I would pit against anyone. In other words, all the stuff that one
would want to look good? It looks good. Many of the long-term unknowns of our
business are becoming known, and we like the answers. I will now elaborate in a
level of financial detail that will give Jason Child a stomach ulcer.
1.

GROWTH IN THE CORE BUSINESS
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1.
We are currently spending more than just about any company ever on
marketing – in Q2, we spent nearly 20% of our net revenue on marketing, while a
typical company spends less than 5%. Why do we spend so much? The simple
answer is “because it works.” But that’s only part of what makes our situation
special.
2.
Our marketing – at least the customer acquisition marketing that we
remove from ACSOI – is designed to add people to our own long-term marketing
channel – daily email list. Once we have a customer’s email, we can continually
market to them at no additional cost. Compare this to Johnson and Johnson,
McDonald’s, or most other companies. If I’m a Johnson, and I’m trying to sell you a
box of Band Aids, I have to keep spending money on commercials and magazine ads
and stuff to remind you about how sweet Band Aids are, even after you’ve bought
your first box. With Groupon, we just spend money one time to get you on our email
list, and then every day we email you a reminder of the sweetness of our
metaphorical Band Aid. There is no cost of reacquisition – it’s unusual (and we
created ACSOI to point that out). If Johnson wanted to follow the Groupon strategy,
he would have to start a free daily newspaper about bandages and then run Band Aid
ads in it every day.
3.
Eventually, we’ll ramp down marketing just as fast as we ramped it
up, reducing the customer acquisition part of our marketing expenses (the piece that
we remove in ACSOI) to nominal levels. We are spending a ton now because we’re
acquiring as many subscribers as we can as quickly as we can. We aren’t paying
attention to marketing budget (just marketing ROI) in the way a normal company
would, because we know that even if we wanted to continue to spend at these levels,
we would eventually run out of new subscribers to acquire. So our customer
acquisition spend drops severely to reflect the fact that eventually we’ll run out of
people we can add to our email list. We view this internally as a very large one-time
expense and then our job forever after will be to continually convert these
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subscribers into customers and to make sure our customers keep buying from us.
Ongoing, the normal marketing dollars we spend are not something we would
remove from our internal calculation of ACSOI.
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Anyway, there’s a reason that I just went on about ACSOI. One of the
questions that skeptics ask is, “when you ramp down marketing, won’t revenues stop
growing as well? Aren’t you just buying growth?” Over the past several months
we’ve been consistently reducing our marketing spend and yet revenues are still
increasing at a significant pace. In Q1 of this year, marketing represented 32.3% of
our net revenues. By the end of Q2 it had fallen to 19.4%. And it has continued to
fall over the past several months all because we’ve been investing in our own longterm marketing channel – our email list.
Internationally we see the same trends – marketing is down, but revenues are
up – every country is either losing less or making more. Even in young markets like
Korea, where we’re still making massive investments, we’re seeing unprecedented
growth. We started building our Korean team this January, despite the presence of
two competitors that were larger than any we’d previously battled from behind.
Thanks to the brilliant execution of the Korean team, we are set to be the market
leader within months. We’ve never had a country grow as fast as Korea!
*
2.

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NEW BUSINESS LINES ARE BOOMING

Travel and Product are enormous opportunities. After only a few months,
they’re already making up 20% of revenue in some countries. We sold $2M worth of
mattresses in the UK – in one day! 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.
While there’s still a ton of work to do, Groupon Now! continues to see
weekly double digit growth. The model works and I believe it will play a major part
in the future of our global business as more merchants and customers join the
marketplace.
3.

WE ARE PULLING AWAY FROM COMPETITION

If there’s a question I’ve received from Groupon skeptics more than any
other, it’s, “how will you fend off the competition – especially massive companies
like Google and Facebook?” I could give a dozen reasons to bet on Groupon, but it’s
impossible to predict the future or the actions of others. Well, now the sleeping giants
have woken up – and the numbers are showing that what was proven true with
literally thousands of other competitors is just as true with the incumbents of the
Internet: it’s kind of hard to build a Groupon. And since anyone with an Internet
connection can track the performance of our competitors, I can be more specific:
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•

Google Offers is small and not growing. In the three markets where
we compete, we are 450% of their size.

•

Yelp is small and not growing. In the 15 markets where we compete,
our daily deals are 500% of their size.

•

Living Social’s U.S. local business is about 1/3rd our size in revenue
(and smaller in GP) and has shrunk relative to us in the last several
months. This, in part, appears to be driving them toward short-sighted
tactics to buy revenue, like buying gift certificates from national
retailers at full price and then paying out of their own pocket to give
the appearance of a 50% off deal. Our marketing team has tested this
tactic enough to know that it’s generally a bad idea, and not a
profitable form of customer acquisition.

•

Facebook sales are harder to track, but are even less significant at
present.

My point is not that our competitors will fail – some may actually develop
sustainable businesses, or even grow – after all, local commerce is an enormous
market. The real point is that our business is a lot harder to build than people
realize and our scale creates competitive advantages that even the largest
technology companies are having trouble penetrating. And with the launch of
NOW, I suspect our competition will have an even harder time in light of the
natural barriers to entry that are needed to build a real-time local deals
marketplace.
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FINAL THOUGHTS
I wrote this email because when I read some of the press this weekend, I
realized a rational person could read this stuff and wrongly conclude that we’re in
trouble. The irony is hopefully clear: We’ve never been stronger.
And while we’ve refrained from defending ourselves publicly, you’ve
continued to create our best defense, with every department innovating new practices
that are taking our business to the next level. Thanks for staying tough, determined,
and agile throughout this process. 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.
I’ve been as candid as possible – hope this sheds some light on things. Reply
with your questions if anything remains unclear. Amidst all this, I hope you
remember what we’re doing here – we are making history together. I guess you don’t
get to build something that reshapes the local commerce ecosytem without getting a
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few bruises. I’m so proud of the work we’re doing, and I feel extraordinarily lucky to
work on what I think is the best thing that’s happened to small businesses since the
telephone We’ve invented something that is catalyzing millions of dollars of local
commerce every single day in 45 countries and fills the lives of millions of customers
with unforgettable experience – it’s pretty remarkable.
Looking forward to getting this behind us!
Andrew
P.S.: I almost forgot to address the nonsense about us running out of money
in the article above. If you apply the same logic used in the article, you’d have
concluded long ago that companies like Amazon and Wal-Mart were running out of
cash too. Both have often had payables far in excess of their cash. Finance geeks call
this a working capital deficit. It’s normal, manageable and a lot of folks actually
believe it’s good thing and would kill to get paid from their customers long before
they have to pay their suppliers. We are generating cash, not losing it – we generated
$25M in cash last quarter alone, adding to the $200M we had before. In other
words, we’re doing the opposite of running out of money.
51.

On November 3, 2011, Groupon issued a press release announcing the pricing of the

IPO, which stated in part:
Groupon, Inc. today announced the initial public offering of 35,000,000 shares of its
Class A common stock at a price of $20 per share. In addition, Groupon has granted
the underwriters a 30-day option to purchase up to an additional 5,250,000 shares of
Class A common stock to cover over-allotments, if any. All of the shares of Class A
common stock are being offered by Groupon. The company’s shares are expected to
begin trading on The NASDAQ Global Select Market on November 4, 2011 under
the ticker symbol “GRPN.”
The lead book-running managers of the offering are Morgan Stanley & Co.
LLC, Goldman, Sachs & Co., and Credit Suisse Securities (USA) LLC. Additional
book-running managers are Allen & Company LLC, BofA Merrill Lynch, Barclays
Capital Inc., Citigroup Global Markets, Inc., Deutsche Bank Securities, Inc., J.P.
Morgan Securities LLC, Wells Fargo Securities, LLC and William Blair &
Company, LLC. Co-managers are Loop Capital Markets, RBC Capital Markets LLC,
and The Williams Capital Group, L.P.
52.

On December 2, 2011, Advertising Standards Authority Ltd. published an article

entitled “ASA refers complaints about Groupon to OFT,” which stated in part:
Following repeated breaches of the Advertising Code by MyCityDeal Ltd t/a
Groupon, the Advertising Standards Authority is now referring complaints that we
receive about Groupon’s ads to the Office of Fair Trading (OFT). We are referring
complaints that specifically concern Groupon’s:
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•

Failure to conduct promotions fairly, such as not making clear
significant terms and conditions

•

Failure to provide evidence that offers are available

•

Exaggeration of savings claims

We are taking this approach because, given Groupon’s track record, we have
serious concerns about its ability to adhere to the Advertising Code. It is in the public
interest that we refer the matter to the OFT, the OFT being better placed to address
any underlying issues concerning Groupon’s trading practices generally.
In 2011, the ASA has formally investigated and upheld complaints against
Groupon’s advertising on 11 occasions. We have also informally resolved 37 cases.
We will continue working closely with the OFT on these issues to ensure consumers
are protected.
53.

On February 8, 2012, Groupon issued a press release announcing its fourth quarter

and full year 2011 financial results. The Company reported a net loss of ($42.7 million), or ($0.08)
diluted EPS, and revenue of $506.5 million for the fourth quarter of 2011. The Company
additionally reported a net loss of ($350.8) million, or ($0.97) diluted EPS, and revenue for the 2011
full year of $1.6 billion. Further, the Company provided its first quarter 2012 guidance, with income
from operations expected to be between $15 million and $35 million and revenue expected to be
between $510 million and $550 million. The release stated in part:
Revenue increased 194% to $506.5 million in the fourth quarter 2011,
compared to $172.2 million in the fourth quarter 2010. The unfavorable impact from
year-over-year changes in foreign exchange rates throughout the quarter was $3.5
million. Gross billings, which reflects the gross amounts collected from customers
for Groupons sold, excluding any applicable taxes and net of estimated refunds,
increased 201% to $1.25 billion in the fourth quarter 2011, compared with $415.3
million in the fourth quarter 2010.
“Groupon had a strong fourth quarter and we finished 2011 having helped
250,000 local merchants across 47 countries grow their businesses while saving
Groupon customers billions of dollars,” said Andrew Mason, CEO and Co-Founder
of Groupon. “We will continue to invest in new services and tools that help our
merchant partners be more successful and drive local commerce around the world.”

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54.

On this news, Groupon’s stock declined to $21.17 per share, but continued to trade at

artificially inflated levels as defendants concealed Groupon’s improper accounting and overstated
revenues.
55.

Then, on March 30, 2012, after the market closed, Groupon issued a press release

announcing a revision to its fourth quarter and full year 2011 results. The Company reported a
reduction in its fourth quarter 2011 revenue of $14.3 million after initially reporting sales of $506.5
million. This resulted in an increase to Groupon’s fourth quarter 2011 operating expenses that
reduced operating income by $30 million, net income by $22.6 million, and EPS by $0.04. Groupon
attributed the revisions to a shift in the Company’s fourth quarter deal mix and higher price point
offers, which resulted in higher refund rates. The release stated in part:
Groupon, Inc. today announced a revision of its reported financial results for its
fourth quarter and year ended December 31, 2011. Groupon also affirmed its
guidance for the first quarter of 2012.
The revisions resulted in a reduction to fourth quarter 2011 revenue of $14.3
million. The revisions also resulted in an increase to fourth quarter operating
expenses that reduced operating income by $30.0 million, net income by $22.6
million, and earnings per share by $0.04. Financial results for prior periods, including
as of and for the nine months ended September 30, 2011, were not affected by the
revisions.
There is no change to Groupon’s previously reported operating cash flow of
$169.1 million for the fourth quarter 2011 and $290.5 million for the full year 2011.
There is also no change to Groupon’s previously reported free cash flow, which is a
non-GAAP financial measure that reflects cash flow from operations less purchases
of property and equipment, of $155.1 million for the fourth quarter 2011 and $246.6
million for the full year 2011.
The revisions are primarily related to an increase to the Company’s refund
reserve accrual to reflect a shift in the Company’s fourth quarter deal mix and higher
price point offers, which have higher refund rates. The revisions have an impact on
both revenue and cost of revenue. A more detailed explanation of the refund reserve
is included in the Critical Accounting Policies and Estimates section of Groupon’s
Annual Report on Form 10-K for the year ended December 31, 2011, filed today
with the Securities and Exchange Commission (SEC).
“We remain confident in the fundamentals of our business, as our
performance continues to highlight the value that we provide to customers and
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merchants,” said Jason Child, Groupon CFO. Groupon affirmed its guidance
contained in its February 8, 2012 press release regarding expectations for first quarter
2012 revenue of $510 million to $550 million and income from operations of $15
million to $35 million. This guidance includes approximately $35 million for stockbased compensation and acquisition-related expense, and it assumes no material
business acquisitions or investments and no further revisions to stock-based
compensation estimates.
56.

On March 30, 2012, The Financial Times published an article entitled “Groupon

restates 2011 results,” which stated in part:
Groupon has revealed an accounting restatement that had the effect of wiping
out its operating profit for the final months of last year, extending the series of
financial hiccups that have bedevilled the fast-growing online coupons company.
The news late on Friday included an admission of “material weakness” in its
internal controls and comes just six months after its initial public offering. It
triggered a 7 per cent drop in its shares in after-hours trading.
Groupon blamed the restatement on its failure to account properly for its
move into new markets where there is a higher chance that consumers will demand a
refund.
Customers who buy coupons that give a discount on high-value services, such
as laser eye surgery or hair removal, are more likely to ask for their money back,
according to the company, forcing it to withhold more of its money in a refund
reserve. The expansion into higher-risk categories like this only took place late last
year, Groupon said, leading to a restatement just of the final quarter’s figures.
The accounting change reduced the company’s reported operating income for
the period by $30m – more than wiping out the $15m it had previously reported for
the period. It had less impact on revenues, shaving $14.3m from the $506m that had
been reported before.
57.

Also on March 30, 2012, Seeking Alpha published an article entitled “Brace For More

Surprises: Groupon Restates Earnings, Reveals Weakness in Financial Controls,” which stated in
part:
After traders packed up for the weekend, Groupon (GRPN) issued two
warnings during the evening of March 30th.
First, Groupon discovered it under-estimated its refund rate for the previous
quarter. As a result, the company revised downward its revenue and earnings
numbers:
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“The revisions resulted in a reduction to fourth quarter 2011 revenue
of $14.3 million. The revisions also resulted in an increase to fourth
quarter operating expenses that reduced operating income by $30.0
million, net income by $22.6 million, and earnings per share by
$0.04.”
This means GRPN actually had a greater loss for the last quarter. GRPN
claims in its 10K filing released in parallel with the restatement that it has fixed its
refund model to include a change in deal mix and higher priced offers. GRPN does
not indicate whether these shifts represent a one-time change or an on-going,
dynamic change. GRPN is holding firm on its guidance for the current quarter, so the
company is implying the shift could be temporary and/or seasonal/cyclical. It is of
course possible GRPN got blindsided with a higher number of low-quality
merchants. For now, I expect overall refund rates to trend upward, and I expect
analysts to ask a lot of questions about this during the next conference call. Refund
dynamics will get the spotlight as a source of potential uncertainty in GRPN’s
revenues and profits.
Second, GRPN warned that it “..identified a material weakness in [its]
internal control over financial reporting which could, if not remediated, result in
material misstatements in our financial statements.” The details are included in the
company’s 10K filing. GRPN is now expanding the scope of a review of its internal
controls mandated by its IPO filing so that it can understand the source of the
weakness and fix it. The 10K makes it clear that the conclusion of this review could
uncover more financial surprises at an as yet undetermined time:
“Although we plan to complete this remediation process as quickly as
possible, we cannot at this time estimate how long it will take, and
our initiatives may not prove to be successful in remediating this
material weakness. If our remedial measures are insufficient to
address the material weakness, or if additional material weaknesses or
significant deficiencies in our internal control over financial reporting
are discovered or occur in the future, our consolidated financial
statements may contain material misstatements and we could be
required to restate our financial results.”
Until this issue is resolved, the implied risk premium for GRPN grows larger.
GRPN’s stock dropped as much as 10% in after-hours trading. Curiously, GRPN’s
stock rallied into these revelations.
58.

On this news, Groupon’s stock dropped $3.10 per share to close at $15.28 per share

on April 2, 2012, a decline of 17% on volume of 10 million shares.
59.

The true facts, which were known by the defendants but concealed from the investing

public during the Class Period, were as follows:
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(a)

Groupon’s financial results were materially false and misleading in violation

(b)

Groupon’s revenues were overstated in violation of GAAP;

(c)

Groupon’s business was not growing to the extent represented by defendants

of GAAP;

and was not nearly as resistant to competition as suggested by defendants;
(d)

The IPO Registration Statement and Prospectus concealed that Groupon was

not in compliance with the laws and regulations of some of the countries in which it operated,
including the United Kingdom; and
(e)

Groupon’s internal controls were so poor and inadequate that Groupon’s

reported results were not reliable.
60.

The market for Groupon common stock was open, well-developed and efficient at all

relevant times. As a result of defendants’ materially false and misleading statements and failures to
disclose, Groupon common stock traded at artificially inflated prices during the Class Period.
Plaintiff and other members of the Class purchased or otherwise acquired Groupon common stock
relying upon the integrity of the market price of Groupon common stock and market information
relating to Groupon, and have been damaged thereby.
61.

During the Class Period, defendants materially misled the investing public, thereby

inflating the price of Groupon’s common stock, by publicly issuing false and misleading statements
and omitting to disclose material facts necessary to make defendants’ statements, as set forth herein,
not false and misleading. Said statements and omissions were materially false and misleading in that
they failed to disclose material adverse information and misrepresented the truth about the Company,
its business and operations, as alleged herein.
62.

At all relevant times, the material misrepresentations and omissions particularized in

this complaint directly or proximately caused, or were a substantial contributing cause of, the
- 20 -

damages sustained by plaintiff and other members of the Class. As described herein, during the
Class Period, defendants made or caused to be made a series of materially false or misleading
statements about Groupon’s business, prospects and operations. These material misstatements and
omissions had the cause and effect of creating in the market an unrealistically positive assessment of
Groupon and its business, prospects and operations, thus causing the Company’s common stock to
be overvalued and artificially inflated at all relevant times. Defendants’ materially false and
misleading statements during the Class Period resulted in plaintiff and other members of the Class
purchasing the Company’s common stock at artificially inflated prices, thus causing the damages
complained of herein.
63.

As a result of defendants’ false statements, Groupon’s stock traded at inflated levels

during the Class Period. However, after the above revelations seeped into the market, the
Company’s shares were hammered by massive sales, sending them down 41% from their Class
Period high.
ADDITIONAL SCIENTER ALLEGATIONS
64.

As alleged herein, Groupon, the Officer Defendants and Director Defendants acted

with scienter in that they knew that the public documents and statements issued or disseminated in
the name of the Company were materially false and misleading; knew that such statements or
documents would be issued or disseminated to the investing public; and knowingly and substantially
participated or acquiesced in the issuance or dissemination of such statements or documents as
primary violations of the federal securities laws. As set forth elsewhere herein in detail, these
defendants, by virtue of their receipt of information reflecting the true facts regarding Groupon, their
control over, and/or receipt and/or modification of Groupon’s allegedly materially misleading
statements and/or their associations with the Company which made them privy to confidential
proprietary information concerning Groupon, participated in the fraudulent scheme alleged herein.
- 21 -

LOSS CAUSATION/ECONOMIC LOSS
65.

During the Class Period, as detailed herein, the defendants made false and misleading

statements and engaged in a scheme to deceive the market and a course of conduct that artificially
inflated the price of Groupon common stock and operated as a fraud or deceit on Class Period
purchasers of Groupon common stock by misrepresenting the Company’s business and prospects.
Later, when the defendants’ prior misrepresentations and fraudulent conduct became apparent to the
market, the price of Groupon common stock fell precipitously, as the prior artificial inflation came
out of the price over time. As a result of their purchases of Groupon common stock during the Class
Period, plaintiff and other members of the Class suffered economic loss, i.e., damages, under the
federal securities laws.
NO SAFE HARBOR
66.

Groupon’s “Safe Harbor” warnings accompanying its reportedly forward-looking

statements (“FLS”) issued during the Class Period were ineffective to shield those statements from
liability. To the extent that projected revenues and earnings were included in the Company’s
financial reports prepared in accordance with GAAP, including those filed with the SEC on Form 8
K, they are excluded from the protection of the statutory Safe Harbor. 15 U.S.C. §78u-5(b)(2)(A).
67.

The defendants are also liable for any false or misleading FLS pleaded because, at the

time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was
authorized and/or approved by an executive officer of Groupon who knew that the FLS was false.
None of the historic or present tense statements made by defendants were assumptions underlying or
relating to any plan, projection or statement of future economic performance, as they were not stated
to be such assumptions underlying or relating to any projection or statement of future economic
performance when made, nor were any of the projections or forecasts made by defendants expressly
related to or stated to be dependent on those historic or present tense statements when made.
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CLASS ACTION ALLEGATIONS
68.

Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a class consisting of all those who purchased or otherwise
acquired shares of Groupon common stock during the Class Period and/or pursuant or traceable to
the Company’s false and misleading Registration Statement for its IPO (the “Class”), and who were
damaged thereby. Excluded from the Class are defendants and their families, the officers and
directors of the Company, at all relevant times, members of their immediate families and their legal
representatives, heirs, successors or assigns and any entity in which defendants have or had a
controlling interest.
69.

The members of the Class are so numerous that joinder of all members is

impracticable. Groupon stock was actively traded on the NASDAQ. While the exact number of
Class members is unknown to plaintiff at this time and can only be ascertained through appropriate
discovery, plaintiff believes that there are hundreds of members in the proposed Class. Record
owners and other members of the Class may be identified from records maintained by Groupon or its
transfer agent and may be notified of the pendency of this action by mail, using the form of notice
similar to that customarily used in securities class actions. Groupon has more than 642 million
shares of stock outstanding.
70.

Plaintiff’s claims are typical of the claims of the members of the Class, as all

members of the Class are similarly affected by defendants’ wrongful conduct in violation of federal
law that is complained of herein.
71.

Plaintiff will fairly and adequately protect the interests of the members of the Class

and has retained counsel competent and experienced in class and securities litigation.

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72.

Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)

whether the 1933 Act and 1934 Act were violated by defendants’ acts as

(b)

whether statements made by defendants to the investing public during the

alleged herein;

Class Period and in the Registration Statement misrepresented material facts about the business,
operations and management of Groupon; and
(c)

to what extent the members of the Class have sustained damages and the

proper measure of damages.
73.

A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
damages suffered by individual Class members may be relatively small, the expense and burden of
individual litigation make it impossible for members of the Class to individually redress the wrongs
done to them. There will be no difficulty in the management of this action as a class action.
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD ON THE MARKET DOCTRINE
74.

At all relevant times, the market for Groupon’s common stock was an efficient

market for the following reasons, among others:
(a)

Groupon common stock met the requirements for listing, and was listed and

actively traded on the NASDAQ, a highly efficient and automated market;
(b)

as a regulated issuer, Groupon filed periodic public reports with the SEC and

(c)

Groupon regularly communicated with public investors via established market

the NASDAQ;

communication mechanisms, including through regular disseminations of press releases on the
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national circuits of major newswire services and through other wide-ranging public disclosures, such
as communications with the financial press and other similar reporting services; and
(d)

Groupon was followed by several securities analysts employed by major

brokerage firms who wrote reports which were distributed to the sales force and certain customers of
their respective brokerage firms. Each of these reports was publicly available and entered the public
marketplace.
75.

As a result of the foregoing, the market for Groupon common stock promptly

digested current information regarding Groupon from all publicly available sources and reflected
such information in the prices of the stock. Under these circumstances, all purchasers of Groupon
common stock during the Class Period suffered similar injury through their purchase of Groupon
common stock at artificially inflated prices and a presumption of reliance applies.
COUNT I
For Violation of Section 11 of the 1933 Act
Against All Defendants
76.

Plaintiff incorporates ¶¶1-42, 44-63 and 68-75 by reference.

77.

This Count is brought pursuant to §11 of the 1933 Act, 15 U.S.C. §77k, on behalf of

the Class, against all defendants.
78.

This Count does not sound in fraud. All of the preceding allegations of fraud or

fraudulent conduct and/or motive are specifically excluded from this Count. Plaintiff does not allege
that the Officer Defendants, Director Defendants or the Underwriter Defendants had scienter or
fraudulent intent, which are not elements of a §11 claim.
79.

The Registration Statement for the IPO was inaccurate and misleading, contained

untrue statements of material facts, omitted to state other facts necessary in order to make the
statements made not misleading, and omitted to state material facts required to be stated therein.

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80.

Groupon is the registrant for the IPO. The defendants named herein were responsible

for the contents and dissemination of the Registration Statement.
81.

As issuer of the shares, Groupon is strictly liable to plaintiff and the Class for any

misstatements and omissions.
82.

None of the defendants named herein made a reasonable investigation or possessed

reasonable grounds for the belief that the statements contained in the Registration Statement were
true and without omissions of any material facts and were not misleading.
83.

By reason of the conduct herein alleged, each defendant violated, and/or controlled a

person who violated, §11 of the 1933 Act.
84.

Plaintiff acquired Groupon shares pursuant and/or traceable to the Registration

Statement for the IPO.
85.

Plaintiff and the Class have sustained damages. The value of Groupon common stock

has declined substantially subsequent to and due to defendants’ violations.
86.

At the time of their purchases of Groupon shares, plaintiff and other members of the

Class were without knowledge of the facts concerning the wrongful conduct alleged herein and
could not have reasonably discovered those facts prior to March 30, 2012. Less than one year has
elapsed from the time that plaintiff discovered or reasonably could have discovered the facts upon
which this complaint is based to the time that plaintiff filed this complaint. Less than three years has
elapsed between the time that the securities upon which this Count is brought were offered to the
public and the time plaintiff filed this complaint.
COUNT II
For Violation of Section 15 of the 1933 Act
Against Groupon, the Officer Defendants and the Director Defendants
87.

Plaintiff repeats and realleges ¶¶1-42, 44-63 and 68-86, by reference.

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88.

This Count is brought pursuant to §15 of the 1933 Act against Groupon, the Officer

Defendants and the Director Defendants.
89.

The Officer Defendants and the Director Defendants each were control persons of

Groupon by virtue of their positions as directors and/or senior officers of Groupon. The Officer
Defendants and the Director Defendants each had a series of direct and/or indirect business and/or
personal relationships with other directors and/or officers and/or major shareholders of Groupon.
Groupon controlled the Officer Defendants, the Director Defendants and all of Groupon’s
employees.
90.

Defendants each were culpable participants in the violations of §11 of the 1933 Act

alleged in the Count above, based on their having signed or authorized the signing of the
Registration Statement and having otherwise participated in the process which allowed the IPO to be
successfully completed.
COUNT III
For Violation of §10(b) of the 1934 Act and Rule 10b-5
Against Groupon and the Officer Defendants
91.

Plaintiff incorporates ¶¶1-90 by reference.

92.

During the Class Period, Groupon and the Officer Defendants disseminated or

approved the false statements specified above, which they knew or deliberately disregarded were
misleading in that they contained misrepresentations and failed to disclose material facts necessary
in order to make the statements made, in light of the circumstances under which they were made, not
misleading.
93.

Groupon and the Officer Defendants violated §10(b) of the 1934 Act and Rule 10b-5

in that they:
(a)

employed devices, schemes and artifices to defraud;

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(b)

made untrue statements of material facts or omitted to state material facts

necessary in order to make the statements made, in light of the circumstances under which they were
made, not misleading; or
(c)

engaged in acts, practices and a course of business that operated as a fraud or

deceit upon plaintiff and others similarly situated in connection with their purchases of Groupon
common stock during the Class Period.
94.

Plaintiff and the Class have suffered damages in that, in reliance on the integrity of

the market, they paid artificially inflated prices for Groupon common stock. Plaintiff and the Class
would not have purchased Groupon common stock at the prices they paid, or at all, if they had been
aware that the market price had been artificially and falsely inflated by Groupon’s and the Officer
Defendants’ misleading statements.
COUNT IV
For Violation of §20(a) of the 1934 Act
Against Groupon and the Officer Defendants
95.

Plaintiff incorporates ¶¶1-94 by reference.

96.

Groupon and the Officer Defendants acted as controlling persons of Groupon within

the meaning of §20(a) of the 1934 Act. By reason of their positions with the Company, and their
ownership of Groupon stock, the Officer Defendants had the power and authority to cause Groupon
to engage in the wrongful conduct complained of herein. Groupon controlled the Officer Defendants
and all of its employees. By reason of such conduct, defendants are liable pursuant to §20(a) of the
1934 Act.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for relief and judgment, as follows:
A.

Declaring this action to be a proper class action pursuant to Fed. R. Civ. P. 23;

B.

Awarding plaintiff and the members of the Class damages and interest;
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C.

Awarding plaintiff’s reasonable costs, including attorneys’ fees;

D.

Awarding rescission or a rescissory measure of damages; and

E.

Awarding such equitable/injunctive or other relief as the Court may deem just and

proper.
JURY DEMAND
Plaintiff hereby demands a trial by jury.
DATED: April 3, 2012

ROBBINS GELLER RUDMAN
& DOWD LLP
JAMES E. BARZ (IL Bar # 6255605)

s/James E. Barz
JAMES E. BARZ
200 South Wacker Drive, 31st Floor
Chicago, IL 60606
Telephone: [phone]
312/674-4676 (fax)
ROBBINS GELLER RUDMAN
& DOWD LLP
DARREN J. ROBBINS
DAVID C. WALTON
655 West Broadway, Suite 1900
San Diego, CA 92101
Telephone: [phone]
619/231-7423 (fax)
CHAPIN FITZGERALD SULLIVAN
& BOTTINI LLP
FRANCIS A. BOTTINI
550 West C Street, Suite 2000
San Diego, CA 92101
Telephone: [phone]
619/955-5318 (fax)
Attorneys for Plaintiff
S:\CptDraft\Securities\Cpt Groupon.doc

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