Buyout Bait Tech Stocks: Groupon (GRPN)
Groupon (GRPN) was slammed last month thanks to a weaker-than-expected outlook, and GRPN currently is off by more than 25% year-to-date.
While Groupon has made great strides in its restructuring — which has involved a transition away from daily deals to e-commerce — it still faces tough headwinds in its new business. Namely, it has to deal with entrenched competitors Amazon and eBay. That means heavy infrastructure investments (for things such as warehouses and supply chain technology), and that’s a problem for a company with only $1.2 billion in the bank.
In other words, Groupon might need to seek out a buyer just to have enough resources to pursue its strategy.
So why would a buyer be interested? A few tangible benefits would include the footprint in both e-commerce and daily deals. Also, there’s Groupon’s extensive sales force, which is focused on small businesses. Plus, GRPN has an impressive mobile footprint — last quarter, the Groupon app was downloaded 9 million times for a total of 70 million downloads, and 80% of the quarter’s downloads didn’t involve any advertising. All told, 50% of its worldwide transactions come from mobile. And Groupon’s market cap of $6 billion, while not small, is at least digestible.
Obvious buyers for Groupon would include Amazon and Google, the latter of which actually offered to buy GRPN a few years ago. But another interesting prospect is Chinese e-commerce site Alibaba, which is looking for ways to go beyond China. Groupon would give it a well-known name (and thus a decent foot in the door) in America.