The American “discount” Groupon, whose main shareholder is the Czech financial group Pale Fire Capital with an almost 22 percent stake, led by investors Dušan Šenkyple and Jan Barta, continues to make losses.
The turnover did not occur even after the company managed to significantly reduce costs under the leadership of the temporarily elected CEO Šenkypla. After the quarterly results were published, shares traded on the prestigious Nasdaq exchange decreased by up to 35 percent.
In the third quarter of this year, the discount portal Groupon reported total sales of 126.5 million dollars, i.e. approximately 2.9 billion crowns. This represents a year-on-year decrease of 12 percent. At the same time, the company was able to reduce operating costs to $111 million from $162 million in the same period last year.
Nevertheless, the net economic result was negative and amounted to -41.3 million dollars. In the same period last year, it was -56 million. Conversely, the operating result EBITDA, which shows earnings without interest, taxes and depreciation, was the second quarter in a row in positive values and amounted to 18.2 million dollars.
“We have made significant progress towards our goal of creating an efficient cost structure. Our focus will now be more on the revenue side after cutting expenses. Although we have not progressed as much as I expected in key projects and our business continues to face challenges, I am pleased with the gradual improvement of our management,” commented Šenkypl, who has been at the head of the company since March this year.
Groupon plunged sharply on Thursday evening after the release of financial results and in light of Groupon’s plans to issue new shares, which could reduce the value of existing ones. They fell below nine dollars apiece in extended American trading on Thursday.
The reason for the decline was also the news that Eric Lefkofsky, one of the founders of Groupon, is leaving the company’s board of directors after 15 years.
The company also reported that free cash flow decreased from $45 million to $18 million quarter-on-quarter.
In order to strengthen the liquidity in its accounts, the company’s management announced a plan to raise new money. This includes the sale of part of the stake in the payment startup SumUp. Groupon already sold a part in October for $8.8 million. On Thursday, the company announced that it had sold another stake for ten million dollars.
The Groupon Company
- The American company that first came up with the idea of bulk discounts. In the Czech Republic, Slevomat, for example, was created based on its model.
- Groupon’s current market value is about $420 million, and investors valued it at $13 billion when it went public at the end of 2011.
- In addition to Šenkypl, other Czech managers also work in the company. Vojtěch Ryšánek took the position of technical director, the former director of the Czech Slevomat Marie Havlíčková is also involved in the project, and Jiří Ponrt took over the position of financial director in April.
- The transformed Groupon should transform from a purely discount portal into a company offering experiences and local services.
The company, backed by Czech investors, will further try to raise additional capital in the amount of $80 million through the sale of new shares to existing shareholders. The set subscription price is $11.3 per share.
Pale Fire Capital is also among the investors who will buy the new shares. She guaranteed that she would also buy back those securities that other shareholders would not be interested in. This commitment testifies to the significant confidence of the management in the long-term potential of the company.
In mid-May, the title briefly fell below the price of three dollars, but then it started to recover. Shares were pushed up by the recent announcement that Šenkypl will lead the company. He promised to try to improve the company’s strategy and efficiency and return it to growth. Since his election, the stock has taken an upward direction, increasing by 300 percent.
In September, the markets were also stimulated by a letter from shareholder Windward Management, which was addressed to Šenkypl’s hands. The company’s main partner, Marc Chalfin, wrote in it that he agrees with the strategy of the new management and that the company paid for the bad cost policy of the previous management. In the letter, he also expressed his belief that Groupon shares could be worth $55 within a year.
In early September, Windward Management announced in a filing with the regulator that it directly or indirectly holds 8.9 percent of Groupon’s equity capital.