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Groupon CEO Mason: I’d fire myself if I were wrong leader

GroupCEO founder Andrew Mastalks Business Insider Wednesday broadcast online. Nov. 28 2012

Groupon CEO and founder Andrew Mason talks to Business Insider on Wednesday, broadcast online. Nov. 28, 2012

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Updated: December 30, 2012 3:41PM



Groupon Inc.’s board of directors meets Thursday, and the prospect that it will consider replacing CEO Andrew Mason, and his apparent willingness to step aside if asked, cheered investors Wednesday.

Groupon’s stock price on Wednesday jumped 11.62 percent, to $4.42 a share, as investors appear to look to the daily deal site’s board of directors to either replace Mason as chief executive officer on Thursday or give him at least six months to turn around the company’s reputation and disappointing financial results.

Responding to a Wall Street Journal report that the board at its regularly scheduled meeting Thursday would consider starting a search to replace Mason, the Groupon founder said, “It would be weird if the board wasn’t discussing if I was the right guy for the job.”

The Journal cited unnamed sources in its Wednesday editions that co-founding investor Eric Lefkofsky and other board members have grown frustrated with the company’ stock performance and have tried to push Mason to be more vocal in defending the business.

In a previously scheduled interview shown live online Wednesday by Business Insider, Mason left himself open to leaving his coveted post. When asked whether he wanted to be CEO, he responded: “I want what’s best for Groupon.”

He also said, “If I ever thought I wasn’t the right guy for the job, I’d be the first guy to fire myself.”

He conceded that Groupon cannot talk itself back to its IPO price of $20 a share. The key will be executing the right strategy, he said, noting that the CEO must bring consistency, leadership, the ability to put together the right team and the ability to lead that team to success.

The stock has lost 77.9 percent of its value since Groupon went public in November 2011, but had inched up in the past week after Tiger Global, a successful New York hedge fund, drastically increased its stake in the Chicago daily deals site to 9.9 percent.

“Investors are glad that the board appears to be taking a more serious approach to running the business,” said Edward Woo, senior research analyst at Ascendiant Capital Markets LLC. “I don’t think [the board] is serious about replacing Andrew right now, but hope to get him to work better and make better decisions.”

Woo said he would give Mason six months, but he believes the board will wait longer because Mason, the Chicago-based daily deal site’s founder, owns so much of the company. A six-month window would give Mason until the end of Groupon’s first quarter 2013.

Lefkofsky owns a 27.7 percent voting stake in Groupon and co-founding investor Brad Keywell owns 10 percent, while Mason holds 19.5 percent.

Analyst Aaron Kessler at Raymond James was less certain that a leadership change would help. He told CNBC’s “Squawk on the Street” that such changes often produce short-term stock spikes but that “fundamentals” ultimately determine the stock price.

Lou Kerner, founder of the Social Internet Fund, a New York-based investor in fast-growing social and mobile technology companies, first told the Sun-Times in July that Groupon’s stock was being hurt partly because investors were struggling to take Mason seriously.

After the interview Wednesday, Kerner said in an email, “The stock is in a tailspin because of poor operational performance. The blame has to fall on Mason. Full stop. It seems the [Groupon] board has decided to leave Mason for the time being and see if Kal Raman, as the new chief operating officer, can help put things back on track (which is highly unlikely given the train wreck the company is at the moment). But if things don’t turn around in the next quarter, I think the board would be neglecting its fiduciary responsibilities by not making a change.”

Later in the interview, Mason said, “As the founder and creator of Groupon, as a large shareholder and as a customer who just loves the product ... I care far more about the success of Groupon than I do about my role as CEO.”

Yet Mason continued to make the case for his leadership, saying, “The team I have put in place and the strategy we can execute” will lead to unlocking a tremendous potential to expand local commerce.

“We’re so excited about what is ahead of us,” Mason said.

Mason said he was surprised that Groupon has become “the tale of two businesses,” with the international business weakening while the North American business and the sale of goods rather than services continue to grow.

Though the goods business provides lower profit margins than daily deals for services at businesses such as spas and nail salons, Mason said, “The margins are things we can optimize over the long term.”

Mason repeated his belief that Groupon can leverage mobile technology for greater long-term growth in the daily deals business, and that Groupon can find a niche in offering curated deals so that it has no need to try to out-Amazon Amazon.

Mason said he and Groupon employees have built up a “resiliency” against critics, and the pain they are going through now is part of a journey that he believes will ultimately prove the detractors wrong.



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