Groupon (NASDAQ:GRPN) stock has definitely struggled during the past year — there’s no denying it. Yet, one audacious firm is evidently willing to take a contrarian bet on Groupon — and just raised the stakes, to put it mildly.
According to a Form 4 filing, Jan Barta of Pale Fire Capital purchased a whopping 375,000 shares of Groupon common stock between April 4 and April 6. The total transaction size, if you can believe it, was $7.5 million.
Those millions of shares were purchased at prices ranging from $19.77 to $20.20. As of April 12, GRPN stock was still trading around that range.
Is Barta of Pale Fire employing a “buy low, sell high” contrarian strategy with Groupon? It’s certainly possible, as the stock is far below its 52-week high of $55.37.
Moreover, Groupon’s trailing 12-month price-to-earnings ratio is 5.41. That’s quite low, and suggests that Groupon shares are trading at a bargain price, in light of the company’s earnings.
Yet, there’s evidently more to the purchase than Groupon’s low valuation. It seems that Pale Fire Capital truly believes in Groupon as a business enterprise. Pale Fire states, “Our experience in building discount portal aggregators and insight into their operations… allowed us to participate in the ongoing transformation of Groupon from the position of the second-largest shareholder.”
Barta, a chairman of the supervisory board at Pale Fire Capital, shed further light earlier this year on why he’s interested in Groupon. In a series of tweets, Barta called fintech firm SumUp a “hidden gem” on Groupon’s balance sheet.
Also, Barta calculated that “even if we put the SumUp stake aside, Groupon is trading at a 3x EV/Ebitda multiple if revenues come back to 80% of pre-covid levels.” So again, GRPN stock could be considered a major bargain at its current share price.
Additionally, Barta mentioned that Groupon recently appointed a new CEO, Kedar Deshpande. He’s the former CEO of Zappos.
“A CEO with Zappos/Amazon credentials in e-commerce? It’s impossible to find a better captain of the ship,” Barta declared.
That’s high praise, indeed. All in all, Barta’s arguments are persuasive and GRPN stock is available now at a reasonable price point. Therefore, it’s not a bad idea to follow Pale Fire Capital’s lead and take your own position in Groupon today.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
