Groupon’s shares are down to around a third of the company’s $20 IPO filed four years ago and now are undervalued by $1 billion, according to one analyst. The statement comes from Piper Jaffray analyst Gene Munster, who feels the company (currently worth $4.98b) should be worth $6 billion.
Groupon could sell significantly undervalued assets
Backing his conclusion, Muster states that Groupon has many significantly undervalued assets which it could sell in the next two years. The company could net as much as $730 million by selling its stake in South Korea-based Ticket Monster, and the cash could come in handy in its transformation from a daily deals site into an e-commerce platform, believes the analyst.
Munster told Bloomberg, “What is safe to say is that Groupon has several stealth assets that are generally under-appreciated by investors as far as overall value.”
Another asset that Groupon could sell, according to the analyst, is its Breadcrumb division, which supplies point-of-sale devices and software to businesses. The division was acquired by Groupon in 2012, and it could help the company with $100 million, stated Munster. Also the analyst stated that Ideel, which the company acquired in 2014 for $43 million, is now worth $100 million. Overall, the analyst believes any division that does not support the current transformation for the company could be sold.
Sale proceeds to help in transition
Groupon is shifting its focus from being a daily deals platform to compete with names such as Amazon and eBay. To reach such levels, Groupon needs more cash, which could come from selling a few of its non-core properties, believe experts. The Chicago-based company had around $1 billion in cash and equivalents at the end of December.
A few months ago, a report from The Wall Street Journal detailed why Ticket Monster might be worth $1 billion and is therefore garnering attention from private equity firms. The report noted that, similar to Yahoo taking benefits from its stake in Alibaba, Groupon too could benefit with a huge cash inflow by selling either full or part of Ticket Monster.
Over the past six month, shares of the company have gained 28% but are still 63% below the IPO price of $20 set in November 2011. On Monday, Groupon shares closed down 1.76% at $7.25, while year to date, the stock is down by almost 12%.