Groupon takes fresh hit after earnings miss

Groupon shares tumbled 16 percent in after-hours trade to $3.28.

The company made its stock market debut at $20 per share a year ago and peaked above $31 dollars a share before analysts soured on the company's prospects.

Revenue increased 32 percent year-over-year to $568.6 million in the third quarter and was up 38 percent in constant currency, as Groupon increased its subscriber base to more than 200 million worldwide.

Gross billings increased five percent year-on-year to $1.22 billion.

But Paul Ausick of 24/7 Wall Street said the markets are nervous about Groupon because of its accounting methods for billings.

"The company is currently being quizzed by the SEC (Securities and Exchange Commission) on its method for estimating future refunds," he said, adding that the stock was facing renewed pressure.

But chief executive Andrew Mason said Groupon's "solid performance in North America was offset by continued challenges in Europe."

He added that the expansion to Groupon Goods "has evolved into a second major category that our customers clearly love. With deals on everything from designer sunglasses to big-screen televisions to most-wanted toys, we think it will be a great gifting destination this holiday season."

Groupon shares were listed on the Nasdaq last November in a blockbuster public offering that raised a whopping $700 million and triggered fears that investors were overvaluing hot Internet startups.

Groupon, which rejected a $6 billion takeover offer from Google a year ago, has enjoyed phenomenal growth since its founding in 2008 but has been dogged by questions about its business model and accounting methods.

Groupon makes its money by selling members deals for discounts on activities, items, or services and then splitting the money with the businesses involved.