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According to a report in the Wall Street Journal, (s nws) the company behind one of the most highly anticipated initial public offerings in recent memory — Chicago-based group-buying pioneer Groupon — is reconsidering its decision to go public due to the recent volatility in the stock market. While the IPO hasn’t been cancelled, a source told the WSJ that it has been postponed indefinitely, and the pre-IPO roadshow has ben cancelled. But was it market volatility that pulled the rug out from under Groupon’s public debut, or the repeated missteps by the company and its CEO, combined with growing skepticism about the viability of its business model?

There’s no question that global stock markets have been in upheaval recently, in part because of uncertainty about the financial health of European nations such as Greece, and how their instability could affect the euro and other global currencies. The Dow Jones Industrial Average is down by about 1,000 points, or roughly 10 percent, since Groupon first filed its S-1 securities document with regulators in early June, and August was reportedly the worst month for failed IPOs in more than a decade.

SEC inquiry into leaked memo

That said, however, the Groupon IPO has been facing a number of other significant headwinds as well, and these have a lot more to do with the Chicago startup’s business than with economic conditions. One of them is a Securities and Exchange Commission inquiry into the circumstances surrounding a leaked memo by Co-Founder and CEO Andrew Mason that made its way online recently. According to the WSJ, the regulator has been asking questions about the leak, since discussing the financial status of the company is a breach of what has come to be known as the pre-IPO “quiet period.”

That’s the second time the SEC has shown a more than passing interest in Groupon. After the company filed its S-1, the regulator also had discussions with the startup about its use of a controversial — and non-standard — financial metric called “adjusted consolidated segment operating income.” Although Groupon argued that this was justified by the way its business operates, using this metric made the company’s financial results look significantly better than they would have otherwise: instead of a $450-million loss in 2010, for example, Groupon showed an $60-million operating profit.

In his cheerleading internal memo, Mason defended the use of the ACSOI benchmark (which effectively removed the majority of the company’s marketing costs from its operating results), saying it reflects the fact that Groupon spends a lot on marketing its business — i.e., in acquiring new customers for its email group-buying offers — but that these costs aren’t important because they aren’t repeated. Said Mason:

Our marketing — at least the customer acquisition marketing that we remove from ACSOI — is designed to add people to our own long-term marketing channel — our daily email list. Once we have a customer’s email, we can continually market to them at no additional cost.

Not everyone buys this rose-colored vision of the company’s future, however — a future in which Groupon simply has to build a giant email list and then market offers to those subscribers at virtually no cost. The company’s many critics, including David Heinemeier Hansson of 37 signals, have noted that instead of going down as the operation grows larger, some of Groupon’s costs continue to climb as it grows larger.

If it doesn’t go public, Groupon will need more cash

And rather than staying steady or growing, business in some of Groupon’s mature markets shows signs of declining — which means more marketing might be necessary to keep current growth rates alive. For more analysis on that topic, please see the recent GigaOM Pro report I wrote about Groupon (subscription required).

If it does decide to cancel its IPO — which was expected to give the company a market value as high as $30 billion — the biggest issue for Groupon will be coming up with the financing required to keep its massive growth machine moving. According to some recent estimates, the company is close to running out of cash, because it is spending so much to hire new salespeople, market its services and acquire Groupon clones in foreign markets. And while the startup raised close to $1 billion in venture financing earlier this year, the majority of those funds went to early investors in the company as well as management, leaving virtually nothing for Groupon to use to fund its operations.

That was a risky bet when the IPO looked like a sure thing, but it seems even riskier now that the public offering could be on hold indefinitely — or even cancelled. If it doesn’t ultimately tap the public markets, Groupon could be saved from having to prove to the world how its business can become the kind of cash-generating perpetual-motion machine that Mason describes in his memo. But without that cash, it may never get the chance.

Post and thumbnail photos courtesy of Flickr users Groupon and Tracy O