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Groupon: Making The Right Moves, Worthwhile Looking Into

Jun. 05, 2020 6:12 AM ETGroupon, Inc. (GRPN)15 Comments


  • With $750 million in cash on its balance sheet, something positive may happen.
  • The near-term potential is likely to be unimpressive, and its revenues will continue to compress.
  • Worthwhile following from the sidelines for any positive developments.
  • Looking for a helping hand in the market? Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. Get started today »

Investment Thesis

Groupon (NASDAQ:GRPN) trades close to an all-time low. However, it still has $750 million of cash on its balance sheet - a high figure for a company trading for approximately $750 million.

Also, it has very strong insider ownership, as well as institutions holding its stock.

Given the very recent exit of its CEO and COO, together with the implementation of its position pill, this company may still have some life left in it.

Therefore, I'm reversing my bearish position I've held on this company and I'm now advocating for cautiously watching it from the sidelines.

Groupon caught selling counterfeit goods - Retail Gazette

From Postponements to Poison Pills

With a significant delay since Groupon's last reported results, the company will reveal its highly anticipated Q1 2020 results on the 16th of June for the quarter ending March.

Given that the company has been through a turbulent period, with its shares fully collapsing, together with its CEO and COO having to abandon ship, it appears fully reasonable that its reporting has taken slightly longer than normal.

Further, it has recently adopted a poison pill policy, which lasts until March next year. Its poison pill essentially states that if an entity is acquiring more than 10% (for active funds) or 20% (for passive funds), the company will substantially dilute the total number of shares outstanding.

Put simply, the poison pill (Rights Plan) works to give the company approximately a year to demonstrate to the community that its prospects are undervalued.

Financial Position - Impressively Strong

Accordingly, this move forced me to question its prospects. Indeed, we can see that Groupon has $750 million in cash and equivalents on its balance sheet. This is offset by $250 million in the form of its convertible notes.

Indeed, there's a clause in the rights plan to prevent shareholder group A-G Holdings, which

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Comments (15)

Action Biased profile picture
@Michael Wiggins De Oliveira I agree that gradually exiting was the right move and I also have a BUY rating on GRPN:


We'll see what tomorrows earnings gonna bring...
Is the RS the right move also? this company has completely destroyed the shareholders
tamnguyenga profile picture
Man ... smart move ... RS 20/1 while sp move from 90 cents to $1.60 in 6 weeks. Do you still believe it can maintain sp to around $30 within 6 months ($1,60 x 20 = $32)
Weren't you the guy who recommended we sell VIAC when it was in the mid-teens predicting a dividend cut? And now you advise that it might be 'worthwhile' for folks to get into a money losing penny stock while you have no skin in the game? Thanks, but no thanks.
dlevine007 profile picture
Groupon would be better off as a part of a bigger company.
I’ve made $$ when it went dwn to $2.20 ish bk in Dec/2019 and sold in Jan/2020...bought bk in as it was tanking.
josephaoppenheim profile picture
I like that its brand is valuable since GRPN is #1 in its category, more important now since we are in a bad recession, with millions of people needing discounts.

That said, I do have two shares of it in my Robinhood account, that is just for fun, never putting money in it. If anyone is interested, you and I get a free share of stock here....

Jack Thursby profile picture
did they cancel the reverse split?
Two major, major issues with this analysis:

1) $750m in cash is valueless next to $820m in current liabilities. In fact, there balance sheet has been broken for a long time. The “equity” on it was basically equivalent to their goodwill, which is all from failed acquisitions. The rest balances out to $0.

2) These numbers are from 12/31. How much cash do they have left now? It can’t be remotely the same given that Goods is no more and Local is getting crushed yet they have still had to chip away at current liabilities. Q1, and then Q2, are going to bury their already broken balance sheet.

It is clear to me, and I’ve heard the same internally, that they have been dealing with very severe liquidity issues since COVID.
Michael Wiggins De Oliveira profile picture
@Teds Montana Grill
'It is clear to me, and I’ve heard the same internally, that they have been dealing with very severe liquidity issues since COVID.'

Respectfully, this is nonsense. Not 100% sure why you are saying this. But anyway, good luck.
Is that all or do you care to add any substance to your comment? The opening line of your thesis is the biz has value due to its cash on hand...six months ago. Yet their short-term payables and other liabilities exceed that amount, and their only remaining biz (local) just basically shut down and will certainly report at least a $100m loss across q1 and q2. Are you saying their b/s is not broken? What possible positive drivers could exist that would keep them from avoiding a cash crunch right now? Or is this just respectful non-sense?
Michael Wiggins De Oliveira profile picture
@Teds Montana Grill
It's an asset-light business, Ted. It doesn't need any assets. It just needs cash. Its balance sheet is strong.

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