The firing of Groupon founder and CEO Andrew Mason has apparently made investors happy. The stock price closed up over 12.5 percent today, another sign that the market had lost confidence in Mason. Investors, which have sold the stock in massive quantities and driven its stock down more than 8 percent since its IPO peak, may welcome this decision, but it's not enough to ensure the company a path to long-term profitability and growth. The company's most recent earnings report indicates that gross margins were shrinking instead of growing and generated a quarter loss of $81 million when analysts expected a small profit. While investors have doubts about the CEO, he won't be the only executive to leave.
Many of the company's most talented executives will likely leave the company soon. They joined expecting to join a Google-like rocketship that would generate massive fortunes, but instead have been left with a dud. Stock options issued to executives that were tied to the IPO price are worthless. The stock price would have to increase tenfold to offer executives a return worth the risk. Once a new CEO is named, they will likely eliminate more executives as they bring in their own team. All this change in headcount over a short period of time could cause significant problems if it isn't managed properly.
The new CEO will have to overcome several gargantuan challenges. Small-business customers question the value the company provides since the Groupon users don't tend to be good customers beyond the discount. Their core product simply doesn’t do what it promised to do: generate quality leads at a good price for small businesses.
Today’s decision may be a step in the right direction, but betting that the company will turn around is a long shot.
Read more Finance Watch articles.