SEC Company Response from Groupon, Inc. (GRPN) (CIK 0001490281) (GRPN) — Jul 14, 2011
Groupon, Inc. (GRPN) (CIK 0001490281)
Date: July 14, 2011 · CIK: 0001490281 · Accession: 0001047469-11-006336
AI Filing Summary & Sentiment
File numbers found in text: 333-174661
Referenced dates: June 29, 2011
Letter
VIA EDGAR AND FEDEX Division of Corporation Finance Groupon, Inc. Registration Statement on Form S-1 filed on June 2, 2011 Amendment No. 1 filed on July 14, 2011 File No. 333-174661
Dear Mr. Spirgel:
On behalf of Groupon, Inc. (the “Company”), enclosed for your review is Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-174661) (the “Registration Statement”), originally filed with the Securities and Exchange Commission (the “Commission”) on June 2, 2011. An electronic version of Amendment No. 1 has been filed concurrently with the Commission through its EDGAR system. The enclosed copy of Amendment No. 1 has been marked to reflect changes made to the Registration Statement.
Set forth below are the responses of the Company to the comments contained in the Staff’s letter to the Company, dated June 29, 2011, relating to the Registration Statement. For convenience of reference, the text of the comments in the Staff’s letter has been reproduced in italicized type herein.
General
Comment No. 1
We note numerous blank spaces throughout the prospectus. Please be advised that you should include the price, use of proceeds, dilution, capitalization, underwriting, and all other required information in an amendment to your Form S-1 prior to any distribution of preliminary
prospectuses so that we may complete our review. Note that we may have additional comments once you have provided this disclosure. Therefore, please allow us sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses.
Response:
The Company undertakes to include the price, use of proceeds, dilution, capitalization, underwriting, and all other required information in an amendment to the Registration Statement prior to any distribution of preliminary prospectuses. The Company recognizes that the Commission must have sufficient time to review its complete disclosure and undertakes to provide the required information in a timely manner.
Comment No. 2
As soon as practicable, please furnish us with a statement as to whether the amount of compensation to be allowed or paid to the underwriters has been cleared with FINRA. Prior to the effectiveness of this registration statement, please provide us with a copy of the letter or a call from FINRA informing us that FINRA has no additional concerns.
Response:
The Company undertakes to, as soon as practicable, furnish the Commission with a statement as to whether the amount of compensation to be allowed or paid to the underwriters has been cleared with FINRA. Further, prior to the effectiveness of its Registration Statement, the Company undertakes to provide the Commission with a copy of the letter or a call from FINRA informing the Commission that FINRA has no objections.
Comment No. 3
Please provide us with copies of your artwork prior to circulating preliminary prospectuses. Since we may have comments that could result in material revisions to your artwork, we suggest that you provide us with enough time to finish commenting on your artwork prior to circulating preliminary prospectuses. See Item VIII of the March 31, 2001 quarterly update to the Division of Corporation Finance’s “Current Issues and Rulemaking Projects Outline.”
Response:
The Company undertakes to provide the Commission with copies of its artwork prior to circulating preliminary prospectuses. The Company recognizes that the Commission must have sufficient time to comment on the artwork and undertakes to provide the artwork in a timely manner.
Comment No. 4
We note that Mr. Eric Lefkofsky, your co-founder and Executive Chairman, has been reported to have stated in an interview on June 3, 2011 that your company is going to be wildly profitable. See http://www.bloomberg.com/news/2011-06-05/groupon-chairman-lefkofsky-says-coupon-company-will-be-wildly-profitable-.html. Please provide your analysis of how this statement is consistent with the disclosure in your prospectus about the company’s financial condition and prospects.
Response:
In order to address the reported statement and related media attention, the Company has added a risk factor on page 28 cautioning prospective investors not to rely on the reported statement—or any other information outside of the prospectus—in making an investment decision.
The Company hereby advises the Staff that the reported statement does not accurately or completely reflect the comments or views of Mr. Lefkofsky. Accordingly, and with due respect to the Staff’s request, the Company will not attempt to reconcile the alleged isolated statement with the comprehensive disclosures in the prospectus. Mr. Lefkofsky did not arrange for, or agree to, an interview with Bloomberg and did not understand that his brief conversation with the reporter in question was on the record. Mr. Lefkofsky’s disavowal of the reported statement as an accurate and full assessment of his views and his good faith intent to avoid any publicity relating to the Company is evidenced by the Company’s request that Bloomberg not publish the alleged statement. As that request was not honored, the Company would propose to address any confusion or possible reliance on the reported statement with a clear caution to prospective investors that it should be disregarded as not fully or accurately reflecting Mr. Lefkofsky’s views and that any investment decision should be made based solely on the information contained in the prospectus.
The Company respectfully advises the Staff that it acknowledges its responsibilities and obligations regarding communications during the registration process and undertakes to continue to advise its board, management and employees of such responsibilities and obligations and diligently monitor and, as appropriate, restrict such communications.
Prospectus Cover Page
Comment No. 5
Please disclose that there will be two classes of authorized common stock outstanding, Class A common stock and Class B common stock, and briefly describe the different rights between the two classes.
Response:
The Company has revised the cover page of the prospectus to disclose that there will be two classes of authorized common stock outstanding and to describe the different rights between the two classes.
Letter from Andrew D. Mason
Comment No. 6
Please move Mr. Mason’s letter to a section of the prospectus that follows the Risk Factors. The description of the development of your company and business philosophy and your company’s growth and relevant financial metrics appear more appropriate for the body of the filing.
Response:
As requested by the Staff, Mr. Mason’s letter has been moved to the section of the prospectus immediately following the Risk Factors beginning on page 32. For convenience, the Company has supplementally provided to the Staff a copy of Mr. Mason’s letter marked to reflect changes from the letter included in the Registration Statement filed with the Commission on June 2, 2011.
We aggressively invest in growth.
Comment No. 7
Please clarify the reference to “long-term.” For instance, does it refer to a period of five, ten, or 20 years?
Response:
In this context, “long-term” is not intended to mean a time period of any specific duration (i.e., five years or 20 years), but instead a time period beyond the current fiscal quarter or year. In other words, the Company’s decision to invest aggressively in subscriber acquisition is based on the belief that the returns from the marketplace it is creating and building through such investment will be realized over a time period longer than the fiscal quarter or year in which the investment is made and recognized. Another premise to this investment theory is that the marketplace created and maintained by the Company is also sustainable over such period. With due respect, the Company submits that this use of “long-term” is consistent with the generally understood meaning of such phrase and no clarifying language is necessary to facilitate the understanding by potential investors.
Comment No. 8
Also, please clarify the quarters in which your investment in growth turned a putative profit into a sizable loss. And, clarify your reference to “short-term consequences.” For instance, explain whether this phrase refers to financial losses, negative press coverage, or other matters.
Response:
The references to the impact of investments in growth on profitability in past quarters has been deleted as unnecessary to Mr. Mason’s message that the Company intends to continue to make such investments. In addition, the generic term “short-term consequences” has been replaced with a specific reference to “impact on short-term profitability.” With due respect, the Company submits that “short-term” is generally understood, as it is intended in this context, to mean a period of less than 12 months and no clarifying language is necessary to facilitate the understanding by potential investors.
We are always reinventing ourselves.
Comment No. 9
We note the reference to merchant demand and merchants struggling with too many customers. Please balance these statements with disclosure of the percentage of deals offered that are not fully subscribed and the company’s experience with a drop off of customers and lack of repeat business at merchants following the expiration of the Groupon.
Response:
The Company respectfully advises the Staff that this section of the letter, including the phrase noted in the Staff’s comment, is intended to provide a factual history of the Company’s development. A key step in this development was the introduction of deal penetration to address local merchants’ concerns about being overwhelmed by customer demand. The Company submits that disclosure of deal “tipping rates” is not necessary to demonstrate or balance this statement of fact. In that regard, the Company supplementally advises the Staff that historically the number of featured deals that failed to attract the prescribed minimum number of customers is nominal. Historically, less than 1% of the deals offered by the Company failed to meet applicable minimum subscription levels. The Company also supplementally advises the Staff that it has not experienced any measureable impact from merchants concerned about a drop off of customers and lack of repeat business. Given the tens of thousands of merchants that the Company has worked with, some have undoubtedly had this experience, but notwithstanding some of the negative press (which tends to be repeated without separate verification), the Company continues to experience very positive relationships with its merchants with strong interest in conducting repeat transactions. Indeed, the limiting factor on repeat transactions has been the Company’s desire to promote increased variety rather than any limitation on merchant demand.
The Company also notes that it has included additional language at the end of the letter to provide better balance to the overall discussion in the letter.
Comment No. 10
We note the references to the mushrooming of Groupon clones and the statement that your investment in technology and deal targeting diminished a reason for clones to exist. Please reconcile these statements with your disclosure in the first paragraph on page 82 where you state your competitors offer substantially the same or similar product offerings.
Response:
In response to the Staff’s comment, Mr. Mason has revised the letter to state that increased deal targeting does not diminish a reason for clones to exist, but rather increases the number and variety of deals offered through the Company’s marketplace. The Company’s ability to offer multiple, targeted featured deals enables it to meet a higher degree of customer and merchant demand in a particular market.
Comment No. 11
Please also clarify the ambitious bets you intend to make that may distract you from your current business. Explain whether this refers to developing different technology, further acquisitions, or partnering with companies in other industries. Further, explain “disruptive products.”
Response:
In response to the Staff’s comment, Mr. Mason has modified the subject language to clarify that investors should expect the Company to make “ambitious bets in technology and product innovation.” The phrase “disruptive products” has been modified to “exciting products” and is intended to refer to products and related technologies that differ from traditional means of buying or selling goods and services.
We are unusual and we like it that way.
Comment No. 12
Please clarify “short time horizons.”
Response:
In response to the Staff’s comment, Mr. Mason has deleted the phrase “short time horizons” and replaced it with the word “immediately.”
Our customers and merchants are all we care about.
Comment No. 13
Please balance the statements regarding the premise that your customers and merchants are all you care about with a discussion of your fiduciary duty to shareholders.
Response:
The Company acknowledges the Staff’s comment and has revised the heading of the subject section to clarify that customers and merchants are not “all” the Company cares about. Making customers and merchants happy is a key objective, but the Company is, and since its inception has been, mindful of its fiduciary duty to its stockholders. As this duty is not impacted in any material respect by the offering, and in light of the revision noted above, the Company respectfully submits that no specific discussion of the subject is necessary in the prospectus.
We don’t measure ourselves in conventional ways.
Comment No. 14
Please discuss that there are measures other than free cash flow to measure long-term financial stability and that free cash flow may be calculated differently from the company’s measure of free cash flow.
Response:
Mr. Mason has revised the subject language to clarify (i) the manner in which the Company calculates free cash flow and (ii) that it is an indicator of long-term financial stability.
Concluding paragraph
Comment No. 15
Please balance the discussion of Mr. Mason’s belief that “Groupon is better positioned that any company in history to reshape local commerce” by noting the company’s net losses and competitive landscape. Provide the basis for Mr. Mason’s belief. Also disclose that Mr. Mason’s belief may not translate into investment returns for potential purchasers in the offering.
Response:
Mr. Mason has revised the subject paragraph to provide the balance and disclosure requested by the Staff. As a supplemental matter, Mr. Mason’s personal belief regarding the Company’s market opportunity is based primarily on experience and perspective gained as a co-founder and Chief Executive Officer of the Company, including his assessment of the “daily deal” industry that he helped to identify and develop through his involvement with the Company.
Prospectus Summary, page 1
Groupon, Inc., page 1
Comment No. 16
Please balance the disclosure on page one regarding your growth by providing the following context:
· In the first bullet point, disclose your net loss for the periods presented
Response:
The Company has revised the first bullet point on page one to include the Company’s net loss for the periods presented.
· In the third bullet point, disclose the number of subscribers who purchased Groupons during the periods presented and the number of those subscribers who were repeat purchasers; and
Response:
The Company has revised the third bullet point on page one to include the number of subscribers who have purchased Groupons during the per
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CORRESP 1 filename1.htm Winston & Strawn LLP 35 West Wacker Drive Chicago, Illinois 60601 July 14, 2011 VIA EDGAR AND FEDEX Mr. Larry Spirgel Assistant Director Division of Corporation Finance US Securities and Exchange Commission 100 F Street, NE Mail Stop 3720 Washington, DC 20549-6010 Re: Groupon, Inc. Registration Statement on Form S-1 filed on June 2, 2011 Amendment No. 1 filed on July 14, 2011 File No. 333-174661 Dear Mr. Spirgel: On behalf of Groupon, Inc. (the “Company”), enclosed for your review is Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-174661) (the “Registration Statement”), originally filed with the Securities and Exchange Commission (the “Commission”) on June 2, 2011. An electronic version of Amendment No. 1 has been filed concurrently with the Commission through its EDGAR system. The enclosed copy of Amendment No. 1 has been marked to reflect changes made to the Registration Statement. Set forth below are the responses of the Company to the comments contained in the Staff’s letter to the Company, dated June 29, 2011, relating to the Registration Statement. For convenience of reference, the text of the comments in the Staff’s letter has been reproduced in italicized type herein. General Comment No. 1 We note numerous blank spaces throughout the prospectus. Please be advised that you should include the price, use of proceeds, dilution, capitalization, underwriting, and all other required information in an amendment to your Form S-1 prior to any distribution of preliminary prospectuses so that we may complete our review. Note that we may have additional comments once you have provided this disclosure. Therefore, please allow us sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses. Response: The Company undertakes to include the price, use of proceeds, dilution, capitalization, underwriting, and all other required information in an amendment to the Registration Statement prior to any distribution of preliminary prospectuses. The Company recognizes that the Commission must have sufficient time to review its complete disclosure and undertakes to provide the required information in a timely manner. Comment No. 2 As soon as practicable, please furnish us with a statement as to whether the amount of compensation to be allowed or paid to the underwriters has been cleared with FINRA. Prior to the effectiveness of this registration statement, please provide us with a copy of the letter or a call from FINRA informing us that FINRA has no additional concerns. Response: The Company undertakes to, as soon as practicable, furnish the Commission with a statement as to whether the amount of compensation to be allowed or paid to the underwriters has been cleared with FINRA. Further, prior to the effectiveness of its Registration Statement, the Company undertakes to provide the Commission with a copy of the letter or a call from FINRA informing the Commission that FINRA has no objections. Comment No. 3 Please provide us with copies of your artwork prior to circulating preliminary prospectuses. Since we may have comments that could result in material revisions to your artwork, we suggest that you provide us with enough time to finish commenting on your artwork prior to circulating preliminary prospectuses. See Item VIII of the March 31, 2001 quarterly update to the Division of Corporation Finance’s “Current Issues and Rulemaking Projects Outline.” Response: The Company undertakes to provide the Commission with copies of its artwork prior to circulating preliminary prospectuses. The Company recognizes that the Commission must have sufficient time to comment on the artwork and undertakes to provide the artwork in a timely manner. 2 Comment No. 4 We note that Mr. Eric Lefkofsky, your co-founder and Executive Chairman, has been reported to have stated in an interview on June 3, 2011 that your company is going to be wildly profitable. See http://www.bloomberg.com/news/2011-06-05/groupon-chairman-lefkofsky-says-coupon-company-will-be-wildly-profitable-.html. Please provide your analysis of how this statement is consistent with the disclosure in your prospectus about the company’s financial condition and prospects. Response: In order to address the reported statement and related media attention, the Company has added a risk factor on page 28 cautioning prospective investors not to rely on the reported statement—or any other information outside of the prospectus—in making an investment decision. The Company hereby advises the Staff that the reported statement does not accurately or completely reflect the comments or views of Mr. Lefkofsky. Accordingly, and with due respect to the Staff’s request, the Company will not attempt to reconcile the alleged isolated statement with the comprehensive disclosures in the prospectus. Mr. Lefkofsky did not arrange for, or agree to, an interview with Bloomberg and did not understand that his brief conversation with the reporter in question was on the record. Mr. Lefkofsky’s disavowal of the reported statement as an accurate and full assessment of his views and his good faith intent to avoid any publicity relating to the Company is evidenced by the Company’s request that Bloomberg not publish the alleged statement. As that request was not honored, the Company would propose to address any confusion or possible reliance on the reported statement with a clear caution to prospective investors that it should be disregarded as not fully or accurately reflecting Mr. Lefkofsky’s views and that any investment decision should be made based solely on the information contained in the prospectus. The Company respectfully advises the Staff that it acknowledges its responsibilities and obligations regarding communications during the registration process and undertakes to continue to advise its board, management and employees of such responsibilities and obligations and diligently monitor and, as appropriate, restrict such communications. Prospectus Cover Page Comment No. 5 Please disclose that there will be two classes of authorized common stock outstanding, Class A common stock and Class B common stock, and briefly describe the different rights between the two classes. 3 Response: The Company has revised the cover page of the prospectus to disclose that there will be two classes of authorized common stock outstanding and to describe the different rights between the two classes. Letter from Andrew D. Mason Comment No. 6 Please move Mr. Mason’s letter to a section of the prospectus that follows the Risk Factors. The description of the development of your company and business philosophy and your company’s growth and relevant financial metrics appear more appropriate for the body of the filing. Response: As requested by the Staff, Mr. Mason’s letter has been moved to the section of the prospectus immediately following the Risk Factors beginning on page 32. For convenience, the Company has supplementally provided to the Staff a copy of Mr. Mason’s letter marked to reflect changes from the letter included in the Registration Statement filed with the Commission on June 2, 2011. We aggressively invest in growth. Comment No. 7 Please clarify the reference to “long-term.” For instance, does it refer to a period of five, ten, or 20 years? Response: In this context, “long-term” is not intended to mean a time period of any specific duration (i.e., five years or 20 years), but instead a time period beyond the current fiscal quarter or year. In other words, the Company’s decision to invest aggressively in subscriber acquisition is based on the belief that the returns from the marketplace it is creating and building through such investment will be realized over a time period longer than the fiscal quarter or year in which the investment is made and recognized. Another premise to this investment theory is that the marketplace created and maintained by the Company is also sustainable over such period. With due respect, the Company submits that this use of “long-term” is consistent with the generally understood meaning of such phrase and no clarifying language is necessary to facilitate the understanding by potential investors. Comment No. 8 Also, please clarify the quarters in which your investment in growth turned a putative profit into a sizable loss. And, clarify your reference to “short-term consequences.” For instance, explain whether this phrase refers to financial losses, negative press coverage, or other matters. 4 Response: The references to the impact of investments in growth on profitability in past quarters has been deleted as unnecessary to Mr. Mason’s message that the Company intends to continue to make such investments. In addition, the generic term “short-term consequences” has been replaced with a specific reference to “impact on short-term profitability.” With due respect, the Company submits that “short-term” is generally understood, as it is intended in this context, to mean a period of less than 12 months and no clarifying language is necessary to facilitate the understanding by potential investors. We are always reinventing ourselves. Comment No. 9 We note the reference to merchant demand and merchants struggling with too many customers. Please balance these statements with disclosure of the percentage of deals offered that are not fully subscribed and the company’s experience with a drop off of customers and lack of repeat business at merchants following the expiration of the Groupon. Response: The Company respectfully advises the Staff that this section of the letter, including the phrase noted in the Staff’s comment, is intended to provide a factual history of the Company’s development. A key step in this development was the introduction of deal penetration to address local merchants’ concerns about being overwhelmed by customer demand. The Company submits that disclosure of deal “tipping rates” is not necessary to demonstrate or balance this statement of fact. In that regard, the Company supplementally advises the Staff that historically the number of featured deals that failed to attract the prescribed minimum number of customers is nominal. Historically, less than 1% of the deals offered by the Company failed to meet applicable minimum subscription levels. The Company also supplementally advises the Staff that it has not experienced any measureable impact from merchants concerned about a drop off of customers and lack of repeat business. Given the tens of thousands of merchants that the Company has worked with, some have undoubtedly had this experience, but notwithstanding some of the negative press (which tends to be repeated without separate verification), the Company continues to experience very positive relationships with its merchants with strong interest in conducting repeat transactions. Indeed, the limiting factor on repeat transactions has been the Company’s desire to promote increased variety rather than any limitation on merchant demand. The Company also notes that it has included additional language at the end of the letter to provide better balance to the overall discussion in the letter. 5 Comment No. 10 We note the references to the mushrooming of Groupon clones and the statement that your investment in technology and deal targeting diminished a reason for clones to exist. Please reconcile these statements with your disclosure in the first paragraph on page 82 where you state your competitors offer substantially the same or similar product offerings. Response: In response to the Staff’s comment, Mr. Mason has revised the letter to state that increased deal targeting does not diminish a reason for clones to exist, but rather increases the number and variety of deals offered through the Company’s marketplace. The Company’s ability to offer multiple, targeted featured deals enables it to meet a higher degree of customer and merchant demand in a particular market. Comment No. 11 Please also clarify the ambitious bets you intend to make that may distract you from your current business. Explain whether this refers to developing different technology, further acquisitions, or partnering with companies in other industries. Further, explain “disruptive products.” Response: In response to the Staff’s comment, Mr. Mason has modified the subject language to clarify that investors should expect the Company to make “ambitious bets in technology and product innovation.” The phrase “disruptive products” has been modified to “exciting products” and is intended to refer to products and related technologies that differ from traditional means of buying or selling goods and services. We are unusual and we like it that way. Comment No. 12 Please clarify “short time horizons.” Response: In response to the Staff’s comment, Mr. Mason has deleted the phrase “short time horizons” and replaced it with the word “immediately.” 6 Our customers and merchants are all we care about. Comment No. 13 Please balance the statements regarding the premise that your customers and merchants are all you care about with a discussion of your fiduciary duty to shareholders. Response: The Company acknowledges the Staff’s comment and has revised the heading of the subject section to clarify that customers and merchants are not “all” the Company cares about. Making customers and merchants happy is a key objective, but the Company is, and since its inception has been, mindful of its fiduciary duty to its stockholders. As this duty is not impacted in any material respect by the offering, and in light of the revision noted above, the Company respectfully submits that no specific discussion of the subject is necessary in the prospectus. We don’t measure ourselves in conventional ways. Comment No. 14 Please discuss that there are measures other than free cash flow to measure long-term financial stability and that free cash flow may be calculated differently from the company’s measure of free cash flow. Response: Mr. Mason has revised the subject language to clarify (i) the manner in which the Company calculates free cash flow and (ii) that it is an indicator of long-term financial stability. Concluding paragraph Comment No. 15 Please balance the discussion of Mr. Mason’s belief that “Groupon is better positioned that any company in history to reshape local commerce” by noting the company’s net losses and competitive landscape. Provide the basis for Mr. Mason’s belief. Also disclose that Mr. Mason’s belief may not translate into investment returns for potential purchasers in the offering. Response: Mr. Mason has revised the subject paragraph to provide the balance and disclosure requested by the Staff. As a supplemental matter, Mr. Mason’s personal belief regarding the Company’s market opportunity is based primarily on experience and perspective gained as a co-founder and Chief Executive Officer of the Company, including his assessment of the “daily deal” industry that he helped to identify and develop through his involvement with the Company. 7 Prospectus Summary, page 1 Groupon, Inc., page 1 Comment No. 16 Please balance the disclosure on page one regarding your growth by providing the following context: · In the first bullet point, disclose your net loss for the periods presented Response: The Company has revised the first bullet point on page one to include the Company’s net loss for the periods presented. · In the third bullet point, disclose the number of subscribers who purchased Groupons during the periods presented and the number of those subscribers who were repeat purchasers; and Response: The Company has revised the third bullet point on page one to include the number of subscribers who have purchased Groupons during the per