According to an article at The Huffington Post, the lawsuit was filed on behalf of all shareholders who purchased stock in Groupon during its initial public offering (IPO). The suit alleges that Groupon either misrepresented or did not disclose vital information to potential shareholders. Among the allegations are that the company understated refund reserves for the fourth quarter and that Groupon lacked adequate internal and financial controls, meaning that its accounting practices were likely inadequate.
Based on those claims, investors allege the company's shares were sold at artificially inflated prices. At its high, Groupon stock was traded at $26.19 per share, according to Time (4/5/12).
Groupon is an online coupon website, offering local deals to customers who purchase the coupon. In November 2011, Groupon issued an IPO that valued the company at more than $10 billion. In March 2012, Groupon announced that it had failed to set aside enough money for customer refunds.
Reuters (4/4/12) notes that the plaintiff is Fan Zhang, who claims he purchased 3,000 Groupon shares in February for $61,800, but sold them in March at a loss of almost $10,000.
READ MORE SECURITIES LEGAL NEWS
Previously, the SEC forced to change how Groupon calculated its revenue. That change cut Groupon's reported revenue in half, according to Time.
Meanwhile, Groupon announced that it would pay $8.5 million to settle a class-action lawsuit that alleged the expiration dates on its coupons are illegal. Bloomberg (4/2/12) reports that Groupon also agreed for the next three years to not sell more than 10 percent of its deals with an expiration date of less than 30 days.