Market cap plunges by $18 billion in the first 12 months
On Friday, December 7th, Krissa Ashton of Daily Deal Media discussed what may have been behind the huge day that shares of Groupon (ticker symbol: GRPN) had. The usual suspects of short covering and trader speculation were water cooler topics and then there is the re-occurring speculation of Google acquiring the daily dealing gorilla.
Many may recall that Google had offered to buy the coupon king for $6 billion before the company went public. Since rejecting the offer and going public, Groupon has been floundering through one snafu after another. In fact the company’s market capitalization had gone from close to $20 billion to below $2 billion as recent as November 12th. That was certainly not a good way to celebrate its first birthday after going public.
Growth rate is non-existent
When GRPN dropped to $2.60 a share, some had thought that the company was done and on its way to bankruptcy. Another group realized that the company was undervalued and that the selling had gone overboard. That group was spot on. Hence the battle between bulls and bears continues and of course the rumors add fuel to the fire.
In my opinion, in order for Google to really be interested in Groupon, then it can’t be due to the daily dealer’s growth rate. Let’s take a look at the dramatic decline in Groupon’s revenues:
June 2011 – 915%
September 2011 – 417%
December 2011 – 279%
March 2012 – 83%
June 2012 – 28%
September 2012 – 0%
The company does boast $1.2 billion in cash on the balance sheet. Oh, wait this is Groupon so there must be more to the balance sheet story. Digging deeper shows that $573 million is due back to merchants, add to that another $245 million in accrued expenses and that original $1.2 billion in cash drops down to the $400 million level.
Realistically, I can’t see Google interested in Groupon for a mere $400 million in cash. with a flat-lined growth rate, the company could become a cash generator. That would have some value, the question is: what would that be worth to Google? I can’t imagine Google would come back with that $6 billion offer.
Fair market value, given Groupon’s cash balance and potential cash generating capability and stagnant growth rate would be closer to the $4 billion to $5 billion level, but stranger numbers have popped up on Wall Street. The bottom line is that this is still a rumor.
Read More: Groupon Profile