Groupon Chairman Lefkofsky Expects ‘Wildly Profitable’ Business

Monday, 06 Jun 2011 10:42 AM

 

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Groupon Inc. Chairman Eric Lefkofsky said he expects the money-losing daily-coupon provider, which filed on June 2 to sell shares to the public, to be “wildly profitable.”

Lefkofsky, who co-founded Groupon and is its biggest shareholder, made the comments on June 3 in response to questions about businesses that he previously ran or founded. These include Starbelly.com, InnerWorkings Inc. and Echo Global Logistics Inc.

“I’m going to be in technology for a long time,” Lefkofsky said. “I’m going to start a lot of companies. These are not sham companies. These are great businesses. InnerWorkings is profitable. Echo is profitable. Groupon is going to be wildly profitable.”

Online-coupon pioneer Groupon said last week it aims to raise $750 million in an initial public offering. While sales at the Chicago-based company surged more than 14-fold to $644.7 million last year, Groupon has also amassed $540.2 million in operating losses since its founding in 2008 and its costs are rising faster than revenue.

The U.S. Securities and Exchange Commission limits what companies can say about future prospects to potential investors between the time they file for an IPO and start trading.

Groupon Chief Executive Officer Andrew Mason barred employees in a June 2 memo from making comments about the company.

Mason’s Memo

“For the next 90 days or so, we are in a ‘quiet period’ where we can’t make any forward-looking statements about the company,” Mason wrote in the memo, obtained by Bloomberg News. “Anything we say now can be perceived as ‘fluffing the stock’ or something like that. So please don’t say anything like ‘Groupon is awesome’ around anyone you don’t fully trust.”

Lefkofsky, in his remarks to Bloomberg, referred to his track record in founding and running businesses. In 2001, he founded printing-service provider InnerWorkings, which went public in 2006. He also helped found Echo Global Logistics, a shipping-technology company, in 2005. That company held its IPO in 2009.

Lefkofsky also co-founded Starbelly.com, an online promotional-merchandise seller, in 1999 and sold it a year later to Ha-Lo Industries Inc. for $240 million. Ha-Lo filed for bankruptcy protection from creditors in July 2001 after writing down the acquisition.

Before Starbelly.com, Lefkofsky and his business partner, Brad Keywell, bought children’s apparel company Brandon Apparel Group. It later faltered, Lefkofsky explained in his blog.

‘Crippled’ by Debt

“Along with our sales growth came lots of debt which eventually crippled the company when fashion trends changed in the late 90’s,” Lefkofsky wrote.

Groupon has surged in the past year as consumers in more than 500 markets worldwide flock to daily discounts of up to 90 percent at hotels, restaurants and nail salons. Its success has inspired more than 480 imitators.

“Groupon is a huge business,” Lefkofsky said.

Lefkofsky gave Mason $1 million to start The Point, a precursor to Groupon that began in 2007 and helps would-be activists raise funds and build petition lists by recruiting friends on the Web. The Point inspired Mason to try a new site based around the idea of collective buying.

The biggest shareholder of Groupon is Green Media LLC, which is owned by Lefkofsky and his wife, Elizabeth Kramer Lefkofsky. Green Media owns 21.6 percent of Class A shares and 41.7 percent of Class B stock.

© Copyright 2014 Bloomberg News. All rights reserved.

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