Sales of the discount portal Groupon, which years ago was the inspiration for the Czech Slevomat, amounted to $126.5 million (2.9 billion crowns) in the third quarter. That was 12 percent less than the same period last year. Operating expenses fell even more significantly – from $162 million last year to $111 million this year.
However, the net economic result was still minus 41.3 million dollars. In the same period last year, it was 56 million. On the other hand, the operating result EBITDA, which is profit before interest, taxes and depreciation, was positive compared to last year’s third quarter.
Shares fell by a quarter
In response to the published economic numbers and also because Groupon plans to issue new shares and thus dilute the value of existing ones, the share price fell by about a quarter on Thursday evening – from levels of around $13.50 to $10. This spring, the exchange rate was briefly below three dollars.
“We have made considerable progress towards achieving our goal of creating an efficient cost structure,” commented CEO Dušan Šenkypl on the results. He has been at the head of the company, which is in serious financial problems, since March of this year. The manager added that the management’s attention will now focus more on the income area after cutting expenses. Among other things, greater attention to products or marketing should contribute to their growth.
“Although we have not made as much progress as I expected on key projects and our business continues to face difficulties, I am pleased to see a gradual improvement in our financial performance,” added Šenkypl.
Despite these words, the company warned investors in its quarterly report that there are still “significant doubts about the company’s ability to continue as a going concern”. This is a warning issued by companies or auditors when they believe that the company is “likely” to run out of cash within the next twelve months from the date of publication of the report. Or that there is a risk that they will violate financial covenants for loans received or bonds issued.
Since the beginning of the year, within three quarters, the company’s accounts have lost 180 million dollars. Precisely in order to strengthen liquidity, i.e. cash on the accounts, the management of the company announced a plan to acquire new capital. Part of the plan is the sale of shares in the payment startup SumUp. Back in October, Groupon announced that it had sold part of its investment for $8.8 million. On Thursday, he announced that he had concluded an agreement to sell another part of the stake for ten million dollars.
Sale of new shares
The company wants to obtain additional capital by selling new shares to existing shareholders in the amount of 80 million dollars. The subscription rate is set at $11.3. Pale Fire Capital, which sent its co-owner Šenkypl to head Groupon, will also buy new securities. The company Pale Fire, whose other main face is the investor Jan Barta, has also pledged to buy those securities that cannot be listed among the other shareholders.
Together with Šenkyple, Pale Fire’s current share is roughly 23 percent. Both Šenkypl and Barta are members of the company’s board of directors. In addition to them, however, other Czechs from Pale Fire Capital also hold key positions in the company. Among the small shareholders of Groupon are also a number of Czech individual investors.