Groupon shares crumple after dismal outlook, take-rate cut

Wed Feb 27, 2013 7:45pm EST
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By Alistair Barr

SAN FRANCISCO (Reuters) - Groupon Inc lost a quarter of its market value on Wednesday after the company revealed it began to take a smaller cut of revenue on daily deals during the holidays, sacrificing revenue and profits to attract and keep merchants.

The cut in its "take rate", which some analysts had said was needed to revive flagging interest among merchants in its Internet offers, was a blow to fourth-quarter results. And a sharper-than-expected post-holiday slowdown in its new e-commerce business contributed to a disappointing first-quarter sales forecast.

The stream of bad numbers, which included a surprise loss in the fourth quarter, drove Groupon's stock down 26 percent to $4.43 in after hours trade. Overall, the company has shed more than three-quarters of its value since debuting at $20 in November of 2011.

"This raises questions about how these guys are going to be able to scale the business," said Tom White, an analyst at Macquarie. "The forecast is underwhelming."

Groupon is among a group of consumer-focused Internet startups that went public to much fanfare in 2011 - before losing massive chunks of market value as investors realized they had over-rated their prospects.

Within a year, Groupon had run into problems dealing with European merchants and sustaining interest among users as deals fever receded. In 2012, analysts speculated that Chief Executive Andrew Mason, known for a quirky sense of humor, may have fallen out of favor with the board.

A company spokesman said Mason remained in charge and the CEO addressed analysts on Wednesday's post-results call.

Groupon reported fourth-quarter revenue rose 30 percent to $638.3 million from $492.2 million in the year-ago period. But it slid into the red with a 1 cent per share loss excluding items, versus expectations for a slim profit of 3 cents a share.   Continued...

People enter and leave Groupon Inc corporate office and headquarters in Chicago, Illinois, November 4, 2011. REUTERS/Frank Polich