Groupon Inc. Chairman Eric Lefkofsky transferred 18.7 million of his company’s shares to early investors, consultants and advisers, according to regulatory filings and a spokesman for the executive.
Of the total, 15.4 million of the shares were transferred from a company called 600 West Groupon LLC, which is managed by a firm owned equally by Lefkofsky and his wife, according to the filing with the U.S. Securities and Exchange Commission. Based on yesterday’s closing price, the total is worth $77.6 million.
The shares are being distributed from a company that was probably set up to pool early investments in Groupon, according to Erik Gordon, professor of law and business at the University of Michigan. Shares of Groupon have declined 79 percent since the company’s initial public offering to a record $4.15 at yesterday’s close, amid pressure from investors concerned about slowing growth and the prospect of insider selling.
“What appears to be happening is this group vehicle, which is a holding company for Groupon’s stock, is being opened up and the stock is being distributed out to the folks who were investors one way or another,” Gordon said.
One of the transfers involves 2.76 million shares, which were distributed to the Lefkofsky Family Foundation, a charitable organization, according to the filing.
Most shares held by 600 West Groupon are being distributed to its beneficiaries “and Eric is distributing the stock he personally owns in that LLC to his family’s charitable foundation,” Charles Sipkins, a spokesman for Lefkofsky, said in an e-mailed statement.
Lefkofksy, who is also Groupon’s co-founder and earliest investor, is still the largest single shareholder, with 109.4 million shares, or about 17 percent of the company, according to data compiled by Bloomberg.
According to the IPO prospectus, 600 West Groupon received $73.4 million through dividends and stock sales during the past three years. Of that, the entity sold $61.6 million worth of stock to new investors in December 2010 and January 2011, which it had originally purchased for $65, according to the filing. In that same round, Groupon Chief Executive Officer Andrew Mason sold $10 million worth of shares and Green Media LLC, an entity owned by Lefkofksy, sold $257.5 million worth.
From late 2009 to early 2011, Lefkofsky’s Green Media received $324.8 million for dividends and stock sales, according to the filing.
Lefkofsky has drawn regulatory scrutiny for his outspoken manner, such as his June 2011 remark to Bloomberg News that he expected the company to become “wildly profitable.” The comment caught the attention of the SEC, whose rules limit what companies can say about prospects between the time they file for an IPO and when shares start trading. Groupon later updated its IPO filing to tell investors to disregard the comments.
The Lefkofsky Family Foundation funds programs focused on education, human rights, medical research and the arts, according to its website. Supported groups include Teach for America, Human Rights Watch, Planned Parenthood of Illinois, the Mayo Clinic and the Art Institute of Chicago.
-- With assistance from Cory Johnson in San Francisco. Editors: Tom Giles, Reed Stevenson