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Groupon fails in attempt to have alleged IPO fraud case dismissed

Groupon has failed in an attempt to have a lawsuit against it, linked to when company went public in 2011, thrown out by a US judge.

The daily deals firm stands accused of misleading investors over its economic forecasts and in-house oversight before the IPO.

Judge Charles Norgle said the lead claimant can plausibly allege that Groupon manipulated revenue and operating figures through "refund accounting" in IPO materials and regulatory filings, and that the firm recognised or should have knew the statements were wrong.

Groupon subsequently had a disastrous IPO, with its share price and value plummeting. It went public at $20 a share in November 2011, placing a value of over $10 million on the company.

By November of the following year however, the share price had plummeted to just $2.60. It has since recovered to $12.64.

The case is being led by an individual investor, Michael Carter Cohn, who is seeking class-action status for the lawsuit. Judge Norgle said he will decide later if Cohn has the right to pursue the claim representing a class as he did not actually purchase his shares straight from the IPO.

In the same ruling, the judge also rejected appeals by Credit Suisse, Goldman Sachs and Morgan Stanley, the IPO's underwriters, to dismiss similar claims made against them.

In February the Groupon board sacked co-founder Andrew Mason as its CEO, and replaced him with another co-founder, Eric Lefkofsky (opens in new tab), who also controls 26 per cent of the shareholder vote.

Groupon said it does not discuss pending litigation.

Tomas is co-founder of Lucky Pilgrim, a team of journalists, photographers and art directors who connect brands to audiences through words, imagery and design. He was formerly editorial director at Chapel and managing editor at Courier magazine, and was a writer for ITProPortal as well as The Independent, EastLondonLines, The Sunday Times Magazine, and Croon.