Why Groupon Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of daily deal site Groupon (NASDAQ: GRPN  ) jumped as much as 15% following the disclosure from investment firm Tiger Global Management that it purchased a 9.9% stake in the company.

So what: According to the SEC filing, Tiger Global Management has acquired an additional 63.7 million shares of Groupon during the latest quarter as the previous SEC filing noted just a 1.3 million share position. This purchase comes just two weeks after Groupon reported third-quarter results which showed a 32% increase in revenue, breakeven EPS, and total cash of $1.2 billion with no debt.

Now what: I'm not quite sure what's in the water at Tiger Global Management, but please keep it out of my drink! Groupon's revenue growth and cash position are enough to give bottom fishers a glimpse of Groupon's potential, but the company's slowing growth forecast and inability to consistently turn a profit gives credence that the business model may be flawed. Despite holding 49% market share, limited barriers to entry have allowed Google through its maps application, Microsoft through its MSN offers, and through its $150 million investment in LivingSocial to join a very crowded daily deal market. Not to mention that Groupon's accounting has been sketchy at best, which is what landed Andrew Mason on my list of worst CEO nominees in 2012. In short, I wouldn't let today's pop cloud your better judgment.

Does Groupon's business model have legs, or is it just another flash in the pan? Find out the answer to this question and much more by getting your copy of our latest premium research report on Groupon. Packed with in-depth analysis on the opportunities and threats facing Groupon -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term investing decisions. Click here to learn more.

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10/28/2016 1:47 PM
GRPN $4.12 Up +0.02 +0.37%
Groupon CAPS Rating: *