Groupon, once the hottest IPO coming to market, has tanked as of late thanks to a slowing growth, a series of accounting gaffes that have garnered SEC attention and the unearthing of Groupon chairman Eric Lefkofsky's questionable history with start-ups. The company, which was once valued at $30bn, will be lucky to get half that. The big question is: How did so many Wall Street firms desperate to underwrite the Groupon I.P.O. miss these warning signs when pitching such a sky-high valuation? Or did they just turn a blind eye? A cursory reading of the various versions of Groupon’s prospectus that lead underwriters Goldman Sachs, Morgan Stanley and Credit Suisse signed off on would give virtually anyone a modicum of pause. And a deep dive into the numbers should have raised alarm bells at the outset about even talking about the possibility of a $30bn valuation. Even the basic numbers are troubling. Groupon has $225mn in the bank. The company lost $102.7mn in the last quarter on revenue of $878mn. That can't continue for long without Groupon requiring fresh cash, which is why the company pushed so hard for an IPO. In total, as of last quarter, the company had $681mn in current liabilities but only $376mn in assets. Among its liabilities, it owed $392mn to vendors. That is because the company receives money from customers before it has to pay its vendors, called a working capital deficit. The company also spent $432 million in the first six months of the year on marketing, an unsustainable model. Add in the fact that Groupon’s revenue slowed in August, up only 13 percent and the picture becomes a bit nerve-racking. It's thus difficult to explain how Groupon’s underwriters, whose endorsement of the company is supposed to be considered the Good Housekeeping Seal of Approval, originally came up with Groupon’s questionable $30 billion valuation. Perhaps more troubling, those same banks allowed their client to publish one of its first filings with an accounting gimmick. It was a made up metric called Adjusted Consolidated Segment Operating Income that accounted for the company’s operating income but conveniently excluded several major expenses, including marketing and acquisition-related costs. That caught the eye of the S.E.C., and Groupon has since been forced to remove the accounting metric. The cynical reason that the banks stood by Groupon and its accounting shenanigans is most likely the expected fees from the offering. Even if Groupon’s I.P.O. values the company at $10bn instead of $30bn, the banks will probably walk away with hundreds of millions of dollars. With a such a huge profit to be made for underwriting, who can guarantee that the banks do their due diligence in acting as the 'gatekeeper' for giant IPOs?