In a significant shift of fortunes, Groupon (NASDAQ:GRPN)'s shares experienced a 26% drop on Tuesday after the company announced the sale of a part of its stake in electronic payments firm SumUp Holdings. The sale, which involved 9.4% of Groupon's 2.3% stake in SumUp, was conducted at a lower-than-expected price, generating €8.4 million ($8.9 million). This transaction suggests a total valuation of SumUp at €3.9 billion ($4.1 billion), marking a stark contrast to the $8.5 billion valuation from a June 2022 funding round.
The reduced valuation reflects over a 50% decrease in SumUp's value and has implications for Groupon's remaining stake in the fintech firm, now worth $94 million. This value reduction represents nearly a $100 million loss for Groupon, impacting its market capitalization which now stands at $360 million. According to InvestingPro data, Groupon's adjusted market capitalization is currently $317.17 million, showing a discrepancy with the previously mentioned figure.
This development contrasts with previous positive outlooks from Bloomberg and Prescience Point Capital Management regarding Groupon's stake in SumUp, which was acquired in 2013. Now, Groupon faces financial difficulties as indicated by its "going concern" warning. The company disclosed in an SEC filing that this sale was part of a plan to improve liquidity and expects the transaction to close by October 23. It's worth noting one of the InvestingPro Tips about Groupon, which indicates that the company's short term obligations exceed its liquid assets, adding context to its current liquidity concerns.
The declining valuation of SumUp mirrors a broader trend within the fintech industry involving venture-backed companies. Notably, Stripe, another fintech firm that offers point-of-sale card reader systems like SumUp, also saw its valuation drop recently from $96 billion to $50 billion.
Despite the current challenges, Groupon has shown some positive signs. InvestingPro data reveals a strong price uptick over the last six months with a total return of 282.87%. However, another InvestingPro Tip suggests that Groupon's stock generally trades with high price volatility, indicating potential risks for investors. For those interested in more detailed insights and tips, InvestingPro offers additional 14 tips about Groupon, helping investors make informed decisions.
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