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WSJ NEWS EXCLUSIVE | CFO JOURNAL

Activist Investors
Circling Groupon as
Shares Slump
Some investors want the daily-deals
company to buy back more stock or even
consider a sale

Groupon Inc., which has seen its valuation plummet since

its 2011 initial public offering, is being circled by activist
investors. PHOTO: ANDREW HARRER/BLOOMBERG
NEWS

By Nina Trentmann
Updated Aug. 29, 2019 10:19 pm ET

SAVE SHARE TEXT

Activist investors are circling Groupon Inc.,

hoping to persuade its management to
conduct a stock buyback, enter into a
strategic partnership or sell the beleaguered
daily-deals company, which has plummeted in
value since its 2011 public-market debut.

Groupon investors and a few outsiders—

including several activist groups—are
jockeying for influence by increasing their
positions in the Chicago-based company or by
aligning with major shareholders, several
people familiar with the matter said. They are
targeting investors who are dissatisfied with
Groupon’s strategy of boosting its valuation
by growing subscriptions.

Groupon’s stock closed at $2.49 each on

Thursday, down about 22% this year and far
below the company’s all-time high of $26.19
on Nov. 18, 2011, about two weeks after it went
public, according to data provider FactSet. At
the time of its initial public offering, Groupon
was valued at $16.5 billion. Today, its market
value is about $1.4 billion.

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Daily Deals Take a Dive

Groupon Inc.'s share price has fallen about 22% so far
this year.
$30

25

20

15

10

0
2012 ’14 ’16 ’18

Source: FactSet

Groupon’s financials have weakened in recent

quarters and the business lost its finance
chief last week.

“It is time to do something more impactful,”

said Robert Chapman, founder of California
investment firm Chapman Capital LLC, which
once pursued activist campaigns against U.S.
businesses but now manages his family’s
assets.

Chapman Capital has been building a Groupon

stake in recent weeks and now holds about 10
million shares, or about 1.5% of the company’s
stock, Mr. Chapman said. He is trying to band
together shareholders to pressure Groupon
management to sell the company or, at least,
buy back $100 million worth of shares, he
said.

“People are coming around to my view,” said

Mr. Chapman, who added that he didn’t want
to lead the campaign beyond building support
for his proposals. Mr. Chapman said he is still
waiting for responses from the shareholders
he has approached.

Two other people familiar with Groupon’s

situation confirmed outreach by activist
investors to existing Groupon shareholders.
One person acknowledged being contacted by
at least three activists. Another described
interactions with a fourth.

Some Groupon shareholders are open to an

activist campaign, these people said. Talks
have been preliminary and no agreements
have been reached, they said.

The average trading volume of Groupon’s

stock has risen to a daily average of about 6.5
million shares during the past five days, up
about 30% from the 90-day average, according
to FactSet.

Groupon Chief Executive Richard Williams

remains “actively engaged” with its
shareholder base, the company said in a
statement. Last year, he indicated on an
earnings call that the company had received
interest from possible buyers, but he didn’t
identify potential suitors.

“We are committed to having an open

dialogue with all of our shareholders,” a
Groupon spokesperson said Thursday.
“However, we do not comment on rumor,
speculation or hypothetical situations.”

Groupon, which connects consumers with

local merchants by offering discounts on
goods, services and activities, has fallen out of
favor with investors because its service is
having difficulty resonating with users,
analysts said.

The once fast-growing startup expanded to

hundreds of cities around the globe before
shifting its focus to local commerce and
higher-value customers. It recently launched
a monthly subscription offer called Groupon
Select aimed at generating more recurring
revenue.

The company’s share price has plunged by

about 38% since Mr. Williams became chief
executive in November 2015, according to
FactSet.

“Selling the company would probably be the

best outcome,” Mr. Chapman said, echoing a
view shared by at least one other person
familiar with Groupon’s situation. New
owners could help refocus the company and
unlock growth opportunities and shareholder
value, they said.

Groupon’s management has rejected offers in

the past two years to take the company
private, one of the people familiar with the
matter said.

Tom Forte, an analyst at D.A. Davidson & Co.,

thinks a combination between Groupon and
other internet-focused businesses would
make sense.

IAC/InterActiveCorp , the New-York based

media company, or Booking Holdings Inc., the
company behind hotel search site
Priceline.com, could be logical bidders for
Groupon, Mr. Forte said Thursday. He also
suggested a scenario that included the
additional acquisition of review company Yelp
Inc. “I see a strategic logic in either of these
combinations,” he said.

IAC’s finance chief said this month that the

company is targeting acquisitions. Joseph M.
Levin, IAC’s chief executive, recently left his
board seat at Groupon. Mr. Levin declined to
comment.

Booking Holdings didn’t immediately respond

to a request for comment. Yelp declined to
comment.

A strategic partnership with a

complementary company also could be an
option for Groupon, according to a person
familiar with the situation.

Lacking a sale, an immediate share

repurchase of $100 million or more would
significantly drive up Groupon’s share price,
Mr. Chapman said.

Groupon has bought back around $900

million of its own stock since August 2013,
according to the company’s most recent
earnings call. The company spent $15 million
in the second quarter to buy back 4.2 million
shares, leaving it with a remaining share
repurchase authorization of $260 million,
according to Groupon’s most recent earnings
call. It had $597 million in cash at the end of
the second quarter.

The company last month reported falling

profit and revenue for the second quarter as a
result of fewer customers and lower traffic on
its site. Gross profit was $292.1 million in the
second quarter, down 9.7% from the prior-
year quarter, while revenue fell 13.7% to
$532.6 million.

“An activist could come in and encourage the

company to divest its international holdings
and use every dollar to buy back shares,” said
Mr. Forte, the Davidson analyst. “Depending
on the activist investor, they could also press
for a management change.”

News of the activist interest comes on the

heels of the resignation of Groupon’s chief
financial officer, Michael Randolfi, who left the
company last week to become CFO of Adtalem
Global Education Inc., a provider of
educational services. Mr. Randolfi didn’t
immediately respond to messages seeking
comment.

Write to Nina Trentmann at

Nina.Trentmann@wsj.com

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