Groupon's $100 million earnings restatement announced late last Friday and its 10-K filing noting a "material weakness in its internal controls" were sins swiftly punished this week. Despite the fact that the restatement lowered Groupon's fourth quarter earnings a mere 3%, Groupon's stock plunged 17% on Monday and closed yesterday at its lowest price since its IPO last November. (Tuesdays are always crummy; see below.)
The bad news for Groupon came fast. The SEC reportedly will be investigating the company (which is not all that uncommon following restatements); a shareholder lawsuit was filed yesterday, and there has been an outpouring of articles questioning Grouponýs business model. Today, a "Seeking Alpha" headline reads "Groupon: The Beginning of the End." Note: no question mark.
All this seems extreme given: the restatement was more like a revision; it was small; new companies often struggle with growth and new products. Plus, restatements are hardly rare. A recent study, "Financial Reporting Credibility After SOX: Evidence From Earnings Restatements," notes "the volume of restatement announcements has risen significantly over time" since the Sarbanes-Oxley Act was passed into law in July 2002.
But everyone is piling on Groupon, just as they're piling on RIM, the once-beloved company that makes what's almost always referred to these days as the soon-to-be-extinct BlackBerry, a tool once so compelling that it earned the nickname CrackBerry. With only 13% of the U.S. smart phone market as of last February, people are basically saying that RIM should just crawl into a hole and die. On the other hand, the BlackBerry's security advantages are rarely disputed, and today's Washington Post suggests that you'll have to rip those Blackberries from official Washington's cold, dead hands. President Obama still loves his.
Now everyone knows that if it bleeds, it leads, but the enthusiasm with which bad news is devoured and shared, and the immediate reactions and over-reactions to it, points, I think, to a growing epidemic of schadenfreude. (It will make me happy if you don't know what that means.) A recent University of Vermont study of 46 billion words contained in 4.5 billion tweets posted over a 33 month-span by over 63 million unique users (talk about Big Data!) found that over the first half of 2011, the general public's happiness was trending downward.
(The study even breaks happiness down into days of the week. Not surprisingly, Saturday is the happiest day, bracketed by Friday and Sunday. The weekly low occurs on Tuesday not, as one might suspect, Monday or Wednesday. So the common practice of breaking bad news on Fridays may not be so wise. It might be better to break it on Tuesdays, when people are going to be miserable anyway, and bank on the upswing as moods improve heading toward Friday.)
Why are we so unhappy? I have no idea. But our ability to share our unhappiness, thereby infecting others, has never been so robust. Technology has industrialized crankiness through the internet and social media, and we're consuming its products in larger and more frequent bitter bites than ever before. That has to have an impact on our lives and it's probably not a good one. The trick, at least for business, is to factor in an unhappines quotient when analyzing opportunities and devising strategies.
Perhaps things aren't as bad as they seem; it just seems that way.