Groupon
shares lost a quarter of their value after the company disclosed that it sold a slice of its stake in the European electronic payments company SumUp Holdings at a price that was apparently far lower than investors expected.
The transaction itself was small. Groupon sold 9.4% of its 2.3% stake in SumUp for €8.4 million, or about $8.9 million. That is a holding equal to just 0.2% of the total shares in SumUp.
The problem is that the price implies a valuation for all of SumUp of €3.9 billion, or $4.1 billion. As recently as June 2022, SumUp had announced a $624 million funding round that valued the company at $8.5 billion. In other words, the valuation of SumUp has dropped by more than 50%.
The implied value of Groupon’s stake, including the portion just sold, is $94 million, a reduction of nearly $100 million. That isn’t small potatoes for Groupon, which has a total market cap, with Tuesday’s decline, of $360 million.
Groupon (ticker: GRPN) shares were down 30%, to $10.73 in midday trading.
In January 2022, Groupon shares soared following a Bloomberg report that said SumUp was considering a new financing round that would value the company at €20 billion, or around $22.6 billion. In late December 2021, the investment firm Prescience Point Capital Management published a report that said the market had “completely overlooked” Groupon’s stake in SumUp, which had been acquired in 2013.
In the new filing with the SEC, Groupon said that it sold the SumUp shares as part of a transaction in which several other investors in SumUp also agreed to sell shares on the same terms. Groupon said it expects the transaction to close on or before Oct. 23.
“As part of our previously announced plan to improve our liquidity position, Groupon has been evaluating potential monetization of certain non-core assets, including our stake in SumUp,” the company said. “In October, Groupon sold part of its SumUp stake in a transaction between existing SumUp shareholders, with multiple buyers and sellers.”
Groupon’s most recent quarterly financial filing included a going concern warning. “Continued cash outflows and operating losses indicate that we may not be able to meet our obligations over the next 12 months,” the company said earlier this year. “These conditions and events, when considered in the aggregate, raised substantial doubt about our ability to continue as a going concern.”
SumUp sells point-of-sale card reader systems to retailers. Valuations of venture backed fintech companies recently have seen considerable declines. Stripe, for instance, recently raised a new round of funding at a valuation of $50 billion, down from $96 billion in 2021.
in response to an inquiry from Barron’s, SumUp issued a statement that suggested the Groupon transaction was not necessarily indicative of the underlying value of the company. “Our shareholders from time to time trade among themselves and are able to set a share value expedient to their requirements at the time of their trade,” SumUp said. “Small secondary transactions between existing shareholders often are not representative of the true value of the company, especially where different classes of shares change hands. The global investment community, as well as existing SumUp investors, recognizes our ability to scale profitably and our remarkable long-term prospects and continues to support SumUp through additional investment.”
Write to Eric J. Savitz at [email protected]
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