What WSJ got wrong about Groupon

August 21, 2012, 1:13 AM UTC

FORTUNE — Have you heard that early Groupon (GRPN) investors are bailing on the company? Well, some of them. Maybe less than half. But one of them is a big name, so it must mean the entire Internet sector is screwed.

Does this strike you as a bit confusing? Well then, it seems you aren’t an editor at The Wall Street Journal, which put this muddle above today’s page one fold:

You want to write a story about how Groupon isn’t living up to expectations, you’ll get no objection from me. But this particular effort is misleading, and made even worse by its prominent placement.

The story’s thesis is that some early investors are selling Groupon stock, which must mean they’ve “lost faith in companies that had been expected to drive a new Internet boom.” Exhibit A is Marc Andreessen, whose firm has dumped all of the shares it acquired in a January 2011 pre-IPO financing round.

I’m not exactly sure why Andreessen Horowitz selling the shares is a negative, given that it booked a $14 million profit off of its $40 million investment. Not a venture home-run, but not terrible for an 18-20 month hold. And I’m pretty sure that generating positive returns is a venture capitalist’s primary job responsibility (not tech cheer-leading, although it’s an easily forgiven error).

More important, however, is the broader conclusion about lost faith in the new Internet crop. Pretty tough leap, considering that Andreessen Horowitz  is among those early Facebook (FB) investors that didn’t sell shares when the lockup expired last week. Is Facebook not one of the “companies that had been expected to drive a new Internet boom?” Or is selling Groupon somehow more important than holding Facebook? Or did WSJ just not bother to check?

Also not mentioned is that New Enterprise Associates, Groupon’s earliest and largest outside investor, has held onto all of its shares since Groupon went public. You’d think that would be some relevant balance for a story titled “Groupon investors give up.” Particularly given that Andreessen was referred to as “among the investors who helped fuel Groupon’s rapid ascent,” despite investing a full three years after NEA first cut a check.

And then there is what WSJ does mention: How certain pre-IPO investors, including T. Rowe Price and Morgan Stanley (MS), not only haven’t sold Groupon stock, but actually have increased their holdings. Did the headline writer not read down that far?

Finally, there is a revelation in this story that Groupon went public over the objections of people like then-board member Howard Schultz and venture capitalists John Doerr and Mary Meeker (whose firm, Kleiner Perkins, also hasn’t dumped shares). Here is how WSJ put it:

Mr. Andreessen was among several Groupon advisers who urged it not to go through with its IPO as planned, said people with knowledge of the discussions. Starbucks Corp. Chief Executive Howard Schultz, who resigned as a Groupon director in April, also voiced worries that Groupon was going public too soon. So did John Doerr and Mary Meeker, partners at venture-capital firm Kleiner Perkins Caufield & Byers, a Groupon investor, said people familiar with those discussions.

Two points: Multiple sources tell me that it is accurate that all four people listed raised concerns about the timing of Groupon’s IPO. But they also tell me that, following intense discussions, none moved to replace CEO Andrew Mason — which is what investors can do in such circumstances, if unpersuaded — and that at least two of the four would go on to explicitly endorse the timing. Moreover, the final board vote to go public, which included Schultz, was unanimous.

Moreover, disagreeing with when a company wants to go public is not the same as losing faith in that company. One strategic decision is a a tree within the forest, albeit a large one.

Again, I’m not telling you to buy Groupon stock or that the company’s diversification strategy will make it the next eBay. I’m simply telling you not to believe every negative headline you read.

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