Groupon's IPO prospect loses luster as COO leaves

— -- Groupon's gold-paved path to a public stock offering is now off track.

Chicago-based Groupon, which created the deals craze, on Friday said Chief Operating Officer Margo Georgiadis is returning to former employer Google. The blow came as Groupon cut in half its previously stated revenue.

Groupon CEO Andrew Mason wrote on the company blog, "Sales, channels, international, and marketing will now report directly to me." He gave no reason for the departure. Georgiadis will become president of Americas at Google.

Groupon shaved its revenue for the first half of this year to $688 million, from $1.5 billion, in an acknowledgment on Friday of accounting missteps with the Securities and Exchange Commission. Groupon had reported the entire deal coupon as revenue instead of subtracting the merchant's cut. Groupon says in SEC filings that revenue minus merchant fees was always the metric to consider.

The double whammy is the latest dose of bad news for what was expected to be one of the hottest initial public offering contenders of the year.

Georgiadis is the second COO to exit in six months. Rob Solomon left after starting in early 2010. Georgiadis joined shortly after the company filed to go public in a bid to raise $750 million.

She held 1.1 million in restricted stock options, according to the SEC. A return to Google today would certainly not match such financial reward. Google declined to comment.

"A COO leaving with all those shares? There's no question that this raises questions," says PrivCo analyst Sam Hamadeh.

Groupon's woes are mounting. The start-up recently canceled its IPO roadshow. And it is losing boatloads of cash — $223 million in the first half of 2011 alone, according to the filings — as it faces a crush of rivals, including deep-pocketed Google.

The deals giant is also operating without cash. Groupon reported working capital of negative $305 million in the first half of 2011, SEC papers showed. Worse, company executives are cashing out from the $1.1 billion that venture firms invested.

"You see insiders trying to dump the shares," Hamadeh says.

So far, some $946 million has been extracted by insiders who cashed out, filings said. Co-founder Eric Lefkofsky took $319 million from the cash-strapped Groupon, according to the SEC documents.

Groupon, in an SEC-mandated quiet period, declined to comment.