Groupon Soars Again, This Time After Alibaba's 5.6% Stake

What Alibaba Can Do for Groupon
  • Chinese e-commerce site is now fourth-biggest shareholder
  • Shares have surged more than 70 percent in two days of trading

Groupon Inc. surged for a second straight trading day, this time after Alibaba Group Holding Ltd. bought a 5.6 percent stake in the online marketplace, rekindling investor interest as the company moves away from its roots as a daily deals provider.

The Chinese e-commerce company bought 33 million shares of Groupon, according to a regulatory filing Friday after the close of markets, making it the fourth-largest shareholder in the website that has lost about 80 percent of its value since going public in November 2011.

Groupon shares catapulted 41 percent to $4.08 at the close in New York, the biggest one-day gain since the Chicago-based company’s initial public offering. The stock has soared 82 percent in two days, combined with its 29 percent gain on Friday.

Groupon has struggled since its IPO to spur growth and profit. In November, the company replaced Chief Executive Officer Eric Lefkofsky with Rich Williams, who has increased the marketing budget in an effort to revive and reinvent the one-time Internet darling into a marketplace where shoppers can find deals on goods and services from restaurants to spa treatments and jewelry. The company has exited 17 countries and now operates in 28 as it continues to streamline its operations internationally.

Alibaba’s stake was reported a day after Groupon reported fourth-quarter results that beat analysts’ estimates, driven by purchases in North America. The company said profit excluding some costs was 4 cents a share, compared with the average analyst estimate for a break-even quarter.

Not Looking at Deals

Even with the gains, the shares are down 49 percent over the past 12 months. Williams said on Bloomberg TV Friday that the stock was undervalued, though he wasn’t looking to make any deals.

“We bought a very small minority stake in Groupon in order to share ideas between U.S. and China markets,” Alibaba said in a statement. “This is a passive holding and if Groupon management would like to exchange experiences with us, we are prepared to share.”

Alibaba has also accumulated stakes in other U.S. companies, including online retailer Jet.com Inc., augmented-reality provider Magic Leap Inc. and car-booking company Lyft Inc.

Bill Roberts, a Groupon spokesman, said Friday that the company hadn’t been aware of Alibaba’s stake until the filing.

“Alibaba has a reputation as a long-term holder, and we’re pleased that they take the same view of Groupon’s opportunity and execution as we do,” Roberts said.

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