Salesforce.com, Inc. (CRM), Netflix, Inc. (NFLX), & Groupon Inc (GRPN): Could One of These Stocks Be the Next Muddy Waters Target?

Groupon has long faced accounting-related criticism

Okay, Groupon Inc (NASDAQ:GRPN) isn’t a Silicon Valley company — it was founded in Chicago. But it’s a new tech company, and Groupon has faced accounting-related scrutiny for quite some time.

Business school professor Anthony Catanach runs the blog Grumpy Old Accounts. He’s been an outspoken critic of Groupon’s accounting methods since before it even went public. In his most recent post on Groupon Inc (NASDAQ:GRPN), he calls the company out on a number of issues.

In particular, Catanach finds fault with the company’s goodwill, which he notes keeps growing. He also writes that the company’s transition from an old business model (daily deals) to a new one (something roughly akin to Amazon.com, Inc. (NASDAQ:AMZN)) raises serious “balance sheet valuation questions.”

Further, Catanach questions the company’s earnings metrics, which he notes could make the company’s financial performance look misleading:

“No review of Groupon would be complete without a discussion of non-GAAP performance metrics…Yes, Groupon still relies on non-GAAP metrics…The Company has shed its infamous CSOI metric in favor of “operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net.”…it’s still a curious metric that inflates operating performance.”

The Muddy Waters effect

In the past, reports from Muddy Waters have been enough to put companies under, or at least send shares down sharply. Sino Forest, for example, was de-listed, and its auditor resigned.

Other companies have emerged relatively unscathed. Shares of Spreadtrum Communications, Inc (ADR) (NASDAQ:SPRD) rebounded completely after the company rebuked an “open letter” from Muddy Waters in the summer of 2011.

It’ll be interesting to see which U.S.-based companies Muddy Waters decides to target. Will the reports be as devastating to U.S. tech stocks as they’ve been to Chinese reverse mergers? Given that many of these companies already trade at absurd valuations, questions about their accounting practices might not have much effect.

Joe Kurtz owns shares of Groupon Inc (NASDAQ:GRPN). The Motley Fool recommends Netflix, Inc. (NASDAQ:NFLX) and Salesforce.com. The Motley Fool owns shares of Netflix.

The article Could One of These Stocks Be the Next Muddy Waters Target? originally appeared on Fool.com.

Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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