Groupon shares continue to drop on worries over growth prospects
Shares of Groupon Inc. continued their downward march amid persistent worries over the daily-deal company’s growth prospects and the flagging confidence of its institutional investors.
Groupon’s stock closed down 2.1% on Monday at an all-time low of $4.65. Shares have tumbled 38% from a week earlier, when the company reported quarterly earnings that disappointed the market. The stock has dropped more than 75% year-to-date.
“I think it’s the aftermath of the earnings that we’re still feeling,” said Arvind Bhatia, an analyst at Sterne Agee. “People are reassessing their [investment] theses.”
The Wall Street Journal reported Monday that several prominent investors, including venture capital firm Andreessen Horowitz, have significantly cut back their stakes in Groupon in recent months.
These backers bought their holdings in the Chicago company before its November initial public offering at $20 a share. Maverick Capital Ltd., for example, held 6.3 million shares in Groupon at the end of March but had scaled back to 1.98 million shares at the end of June, according to filings with the Securities and Exchange Commission. The Journal noted that other investors, including T. Rowe Price, which has an 11.6% stake, according to SEC filings, have held steady or bought more shares in Groupon.
One important group of insiders is standing pat: Chief Executive Andrew Mason and his co-founders, Eric Lefkofsky and Brad Keywell. The three collectively own roughly one-third of Groupon’s outstanding Class A shares, which totaled 651.3 million, according to the company’s most recent earnings report. Lefkofsky’s stake is the largest at 20%, compared with Mason’s 7% and Keywell’s 6%.
In June, when restrictions on post-IPO insider selling were lifted, Mason said the co-founders had no plan to unload their stock because they believed in the company’s future.
Groupon’s latest earnings report, however, has stirred doubts about whether the company’s core daily-deals business has the same momentum it showed in earlier periods. Several analysts downgraded the stock last week. The most recent firm to do so was Evercore, which slashed its price target on the company to $3.
“There’s value in the business,” Bhatia said. “Right now, what you’re in is an emotional selling phase for many [investors], whether it’s Facebook or Groupon.”
