Ahead of Groupon's highly anticipated initial public offering in November, the SEC repeatedly pressed the daily deals giant to defend its business model and its accounting measures, according to comment letters recently disclosed.  In the letters, the SEC seemed somewhat skeptical of Groupon’s business model and called on the company to balance its bullish statements with additional disclosures. Regulators also asked Groupon to address comments made by executives during the so-called quiet period, which seemed to defy SEC rules. The letters, sent by the SEC from June 29 to Oct. 3, provide an interesting window into the back-and-forth discussions between the company and its regulators in the months leading up to its IPO. In the first letter, dated June 29, the SEC outlines 73 comments, spanning 14 pages. Among the comments, regulators called on Groupon to list specific risk factors for its international operations, provide additional data on consumer attrition and repeat merchants and temper certain statements about the company’s growth prospects. In one section, for instance, the regulators advise the company to reframe a comment made by its chief executive, Andrew Mason, who had said in a filing that “Groupon is better positioned than any company in history to reshape local commerce,” to include the company’s “net losses and competitive landscape.” Notably, the SEC was also particularly clear about its reservations on Acsoi, or adjusted consolidated segment operating income, an uncommon financial yardstick Groupon introduced in its first filing. In the June 29 letter, the SEC said Acsoi — which is essentially operating profit stripped of marketing and acquisition costs — was somewhat misleading to prospective investors:

It appears that online marketing expense is a normal, recurring operating cash expenditure of the company. Your removal of this item from your results of operations creates a non-GAAP measure that is potentially misleading to readers. Please revise your non-GAAP measure accordingly.

The exchange between the SEC and Groupon, reveal the company’s initial resistance. In a July 14 letter to the SEC the company tried to defend its math, arguing that Acsoi does include some expenses related to marketing for existing subscribers. The SEC was not swayed, and in a subsequent letter, simply asked for its removal. On Oct. 10, Groupon complied in a revised filing.  For more go to, [Dealbook 12/29/11]