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Groupon’s first set of financial statements as a public company did not go well: The company is being examined by the SEC in the wake of its restatement of revenue. And Andrew Ross Sorkin is using the news to ask President Obama why he supports weaker protections for investors. The bill, Sorkin writes, could open the door for companies like Groupon to conceal information from investors. If you bought Groupon when it opened, he notes, you’d have already lost 41 percent of your investment in just five months:
Its goal is noble: start-ups and small businesses are the lifeblood of our economy, and it is hard to argue with helping entrepreneurs build businesses and hire employees.
However, the legislation, in the name of creating jobs, dismantles some of the most basic protections for the most susceptible investors apt to be drawn into get-rich-quick scams and too-good-to-be-true investment “opportunities.”
Henry Blodget said Sorkin was confusing investor protections with the investors’ well-established tendency to overvalue stocks. Investor emptor, in other words.
The Harvard Business Review‘s Justin Fox smartly triangulated between these positions:
Most of the money lost by individual investors in financial markets is lost to bad luck and poor decision-making, not inadequate accounting rules or financial regulation. Individual investors should be disabused of the notion that investing in IPOs like Groupon’s is a safe and responsible path to financial security. So is the way to do that with more rules and disclosure, or by offering fewer regulatory assurances and cultivating more of a caveat emptor attitude among investors?
So, depending on how you look at it, investor protections are either crucial to the public interest or a potentially misleading stamp of approval from regulators. Confused? There’s more here on the good and bad of the JOBS Act.
Beyond Groupon, today was the day the econoblogosphere got its version of a cute baby animal GIF: this encouraging entry for the Wolfson Economics Prize, made by an 11-year-old from the Netherlands, complete with a hand-drawn chart showing a pizza currency-exchange mechanism. If that doesn’t warm your heart, well…
On to today’s links.