(Reuters) - Groupon Inc (GRPN.O) pared back revenue and net income for the fourth quarter, blaming higher refunds on deals for the sharp downward revision in its previously reported numbers.
Groupon also said in its annual report, filed on Friday with the Securities and Exchange Commission, that it has a “material weakness” in internal controls over its financial statement.
The company’s shares plunged more than 10 percent in afterhours trading.
As a private company, Groupon was one of the fastest-growing businesses in history and in November pulled off one of the largest Internet IPOs of the past decade, valuing the company well over $10 billion.
However, it was criticized by some analysts and investors for aggressive accounting in the run-up to the IPO. Groupon changed the way it reported results under pressure from regulators.
“When you’re a public company, there’s a certain level of expectations for financial controls,” said Herman Leung, an analyst at Susquehanna Financial Group.
“It’s probably because it’s such a fast growing business that it doesn’t have all the systems in place. Maybe they don’t have enough financial personnel.”
The largest daily deals company said net income for the fourth quarter of 2011 was reduced by $22.6 million, while revenue was revised lower by $14.3 million.
“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,” it said in statement.
The company’s shares were down to $16.59 in afterhours trading from a close of $18.38 on the Nasdaq.
Groupon said it has been working with a global accounting firm to prepare a report by the end of 2012 on the effectiveness of its internal controls - something that is required in the wake of an IPO.
“The Company continues to implement process improvement initiatives and augment its staffing, and is expanding the accounting firm’s engagement scope to address the underlying causes of the material weakness,” Groupon added.
Reporting by Edwin Chan; editing by Andre Grenon