CHICAGO - Groupon, Inc. (NASDAQ: NASDAQ:GRPN) has reached agreements to exchange and issue a new series of notes, the company announced today. The e-commerce marketplace is exchanging $176.26 million of its 1.125% Convertible Senior Notes due 2026 for an equal amount of 6.25% Convertible Senior Secured Notes due 2027. Additionally, Groupon will issue $21 million of the 2027 Notes at a 5% discount, raising $20 million in gross cash proceeds.
The transactions, expected to close promptly following customary conditions, will result in the issuance of approximately $197.26 million in aggregate principal amount of 2027 Notes. Groupon has earmarked the net proceeds from the new notes for general corporate purposes.
Under the terms of the new indenture, Groupon will pay interest semi-annually at a rate of 6.25% per annum, with the first payment due on March 15, 2025. The notes will mature on March 15, 2027, unless converted or repurchased earlier. Groupon has also committed to certain covenants regarding asset sales and pledges, with a penalty of an additional 2.5% per annum interest if it fails to comply.
The initial conversion rate for the 2027 Notes is set at 33.333 shares of common stock per $1,000 principal amount, equating to an initial conversion price of approximately $30 per share. This represents a significant premium over Groupon's recent average stock price. The notes will be convertible into common stock, cash, or a mix of both, at Groupon's discretion.
Groupon has stated that the 2027 Notes and any common stock issuable upon conversion have not been registered under the Securities Act of 1933 or any state securities laws, and may not be offered or sold without registration or an applicable exemption.
The 2027 Notes will be guaranteed by certain Groupon subsidiaries and secured by a first priority interest in most of Groupon's assets. Advisory services for the transaction were provided by J. Wood Capital Advisors LLC and Jefferies LLC, with legal counsel from Winston & Strawn LLP.
This press release is based on a statement released by Groupon and should not be considered as an offer to sell or a solicitation of an offer to buy any securities.
"In other recent news, Groupon, Inc. has reported a series of developments. The company disclosed an increase in North America Local revenues year-over-year, a rise in active customers for two consecutive quarters, and its fifth successive quarter of positive adjusted EBITDA, generating $11 million in free cash flow. In addition, Groupon has revealed plans to expand its Software (ETR:SOWGn) as a Service (SaaS) organization in North America and exit the local business in Italy. This transformation plan, involving the sale of non-core assets, is projected to yield approximately $90 million. Despite a 5% year-over-year decrease in global billings to $374 million, Groupon anticipates its revenues to return to positive growth in the fourth quarter, contingent on the successful launch of their new consumer front-end. Roth/MKM has maintained its Buy rating on Groupon's shares, with a steady price target of $26.00, indicating confidence in the company's potential to overcome short-term obstacles. The firm also expects Groupon to guide strong growth in the fiscal year 2025. These are among the recent developments from Groupon, Inc."
InvestingPro Insights
Groupon's recent financial maneuvers, as detailed in the article, can be better understood in light of some key metrics and insights from InvestingPro. The company's market capitalization stands at $447.89 million, reflecting its current position in the e-commerce marketplace sector.
One of the most notable InvestingPro Tips is that Groupon operates with a moderate level of debt. This context is particularly relevant given the company's recent move to exchange and issue new convertible notes. The decision to refinance its debt with new 6.25% Convertible Senior Secured Notes due 2027 could be seen as a strategic move to manage its debt structure and potentially improve its financial flexibility.
Another InvestingPro Tip highlights that Groupon has impressive gross profit margins. Indeed, the data shows a gross profit margin of 89.12% for the last twelve months as of Q2 2024. This high margin could provide the company with some financial cushion as it navigates its debt restructuring and pursues growth initiatives.
It's worth noting that while Groupon has shown a significant return over the last week, with a 9.7% price total return, the company's stock price movements are quite volatile. This volatility underscores the importance of the company's efforts to stabilize its financial position through the debt exchange and new note issuance described in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide a fuller picture of Groupon's financial health and prospects.
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