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Groupon Already a Tough Sell

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- As Groupon (GRPN - Get Report) begins trading in public markets, we look back into its short history to see how the company's market valuation has fluctuated since its inception. In recent months, the firm has come under severe scrutiny for some of its accounting practices, cash burn rate and other financial details that have been revealed in the Securities and Exchange Commission filings, which have been revised several times.

Last month, Groupon restated the way it accounts for revenue to reflect a more conservative set of numbers for revenue recognition purposes. It also announced that it had lost its second COO in less than a year. The firm is also facing increased competition from Google (GOOG), LivingSocial, Amazon (AMZN) and hundreds of other smaller start-ups. Recent market volatility and renewed global concerns about the health of the global economy aren't helping in any fashion either.

As a result, Groupon's expected valuation has fluctuated substantially over the last year. Below we discuss a few key factors and perceived risks that could have led to these significant changes. See our full analysis for Groupon.

Since the launch of Groupon's first pre-IPO S-1 filing in June, the company has caught flak for its unconventional accounting metrics, the chief one being the adjusted consolidated segment operating income or ACSOI. This non-GAAP metric, which shows operating income does not take into account the marketing expenses incurred by Groupon. The metric came around as being especially suspicious to investors, considering that Groupon's marketing expenses are quite significant and have crossed the $600 million mark for the first nine months of 2011 alone. Hopes for a $25 billion valuation which some had expected a few months back were soon dashed as Groupon released its numbers indicating concerns about the company's business model and the daily deals business in general.

Prolonged market volatility and uncertainty over the global economy have put the market for offerings in a deep freeze since the middle of August. Companies such as Liberty Mutual and Glacier Water Services which were supposed to I.P.O. recently have withdrawn their applications and others such as Zeltiq Aesthetics have priced their stock well below the expected range.

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