Groupon on Thursday ousted its CEO, company co-founder Andrew Mason, replacing him with two current directors amid increasing heat about the deal site's disappointing financial performance.
In a letter to employees, Mason said he was fired, with a playful and self-deprecating addition: "If you're wondering why ... you haven't been paying attention."
"From controversial metrics in our (initial public offering) to two quarters of missing our own expectations and a stock price that's hovering around one quarter of our listing price, the events of the last year and a half speak for themselves," Mason continued. "As CEO, I am accountable."
As far back as November, Groupon and Mason were forced to respond publicly to a report that he would lose his job. Reports surfaced at the time that Groupon's board was considering replacing Mason with a more experienced CEO to lead the Chicago-based daily deal company's turnaround.
The board said it's searching for a permanent replacement. For now, Executive Chairman Eric Lefkofsky -- an original investor -- and Vice Chairman Ted Leonsis will share the task.
The company said its earnings expectations for the first quarter and full year outlined on Wednesday remain unchanged.
Investors appear to applaud Mason's departure, driving shares up in after-hours trading after a brutal regular session in which the stock lost a quarter of its value. Shares had plummeted in continuing fallout from a weaker than expected earnings report and forecast on Wednesday. The stock jumped 8 percent after hours on the news and was at $4.70, up nearly 4 percent, at 5:26 p.m.
Mason, a 32-year-old Northwestern University graduate, has come under fire for a series of missteps including controversy during its IPO and not finding a quick enough solution for its financial struggles.
Arvind Bhatia, a senior research analyst at Sterne Agee who recently upgraded Groupon to a "buy" with a $9 price target, said he expected Mason to have a few more quarters to prove himself, but the plummeting stock price likely forced the board to make a move.
"I think the reaction to the stock pushed them over the edge," Bhatia said. "It was basically saying that the market is not giving Andrew a vote of confidence, and I think the board took that message seriously."
Groupon, which was founded in 2008, was once a red-hot company that sparked a number of deal site competitors by marketing discounts on local services such as spas and restaurants to millions of online subscribers.
It turned down a nearly $6 billion buyout offer by Google in 2010 that at the time was thought to undervalue the company. A year later, it ended its first day as a public company worth $16 billion.
But it has lost about three-quarters of its value since it went public. On Thursday, its market capitalization was less than $3 billion, according to Capital IQ.
The scrutiny of Groupon was tremendous, given the "high-flying" nature of the company and the culture created and fostered by Mason, observers said.
That culture turned from a lovable quirk to a major liability as the company ran into controversy over its poorly received Super Bowl ads two years ago and a series of missteps before its IPO. Then, within months of its public debut, it disclosed an accounting flaw that forced it to restate financial results.
The larger question surrounding Groupon -- the long-term viability of its basic business model -- remains. The company has been expanding offerings beyond its core daily deals, where growth has slumped.
On Wednesday, the company posted a fourth-quarter net loss of $81.1 million, or 12 cents a share, missing Wall Street's expectations for a profit. Revenue for the quarter was up 30 percent, in line with analysts' views.
Groupon also warned Wednesday that its turnaround would take time, suggesting it will likely cut employees and overall expenses.
Tribune reporter Robert Channick contributed.
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