The Groupon Conundrum: The IPO Goes On For Now, But When Will the Drama Stop?

First off, let’s get this out of the way:

No, Groupon has no current plans to pull its IPO, nor has it considered it as yet, even though its delays — not uncommon — get copious negative press. Though it certainly might in the future.

Yes, the Chicago-based social buying service is still growing more strongly than most start-ups and is expected to become profitable on an operating basis within the next month.

No, the Groupon board has not discussed jacking its CEO and co-founder Andrew Mason — I get a tip email on this on a daily basis — but it will also not be hiring another COO to replace the second one it has lost in a year.

And, finally, yes sirree, many of the recent kerfuffles that Groupon has found itself in most certainly could have been better handled by Mason and that board, who have presided over one the rockier and more cloddish IPO rides in recent memory.

In fact, has there ever been a tech start-up that has attracted more negative attention from the media than Groupon?

Maybe Amazon back in the day when it was being called Amazon.bomb? Or perhaps the early years of Facebook, when questionable origins, executive shifts and constant privacy snafus created worry around the leadership of CEO and co-founder Mark Zuckerberg?

But, as it has turned out, both have paled in comparison to the trials and tribulations of Groupon, which came out of nowhere like some kind of Internet comet and now is being widely pilloried as a flash in the pan.

Whether that’s fair criticism or not will be up to investors as the company continues its march to a public offering, which sources close to the company say will not be pulled unless the markets tank drastically.

That’s despite three amended S-1 regulatory filings by Groupon that corrected controversial accounting treatments that the company was using.

One, called Adjusted Consolidated Segment Operating Income, or ACSOI, was attacked because it left out key marketing expenses. While Groupon said it was an important metric to judge the performance of various cities as they were rolled out, the Securities and Exchange Commission and many others thought it caused more confusion than clarity.

The other financial term under scrutiny: The naming of gross billings, which is what Groupon pays out to merchants, as gross revenues. No longer, with the latest amendment to its S-1 filing; Groupon becomes instead a net revenue reporter for its daily deals business.

The change reduced reported revenue for 2010 from $713.4 million to $312.9 million.

Also added in were parts of the controversial letter CEO Andrew Mason sent to employees — defending all of Groupon’s financial practices and disclosures — presumably to reassure them in the wake of all the bad press.

While it displayed a lot of Mason’s signature humorous bravado, the move felt to me more like someone frustrated with being asked by current and potential employees if he were the Internet version of Bernie Madoff.

That’s ridonkulous, of course.

But the aggressive accounting, quick change from using those controversial financial metrics and chaotic breakneck growth that makes the company look like a house on fire certainly creates a picture of drama at a time when calm is probably the image they would like to portray.

Of course, losing two COOs — first, former Yahoo Rob Solomon after a year and then former Googler Margo Georgiadis after less than six months — in a row cannot help but increase the pressure. (And it cannot help Groupon’s image that Georgiadis went back to an even better job at the search giant.)

Sources said the company has no plans to hire another one, instead empowering Mason’s direct reports such as its CFO and others.

That said, while sources inside the company spin this as no big deal and can roll out plausible excuses for the COO departures — which mostly center around the execs being a “bad fit” — such movements always create worry.

In fact, this also happened to Facebook in its earliest days, when it seemed like an executive revolving door. That’s changed, of course, with the social networking giant looking like the digital Rock of Gibraltar in comparison.

A rock that has not been in any hurry to go public, which Groupon did perhaps too early in June — just about when all this bad news starting piling up, after more than a year of praise from the very same media.

I suppose, you live by it and you, well, get smacked upside the head by it.

But not damaged enough to pull the IPO, as yet, that is. One of the many reasons for sticking for now — such a move would result in yet another firestorm for Groupon.

Said one person I spoke to: “It would not matter what anyone said, no one would believe the company was anything but in trouble.”

And then, of course, the real trouble would start.

We’ll see what happens next, of course.