GRPN Stock: Is Groupon Inc the Next LinkedIn Corp?

GRPN StockThe Next Big Thing for Groupon Stock

LinkedIn Corp (NYSE:LNKD) stock investors are probably the biggest winners this week. After the market learned Microsoft Corporation (NASDAQ:MSFT) would be acquiring the social media company, LinkedIn stock skyrocketed 48%. Of course, deals like this don’t happen very often, but if you take a closer look, you’d see that there might be another great acquisition target on the market—Groupon Inc (NASDAQ:GRPN) stock.

For those who do not know, Groupon is an e-commerce marketplace. How does it differ from others? Well, the company has a focus on connecting consumers with local merchants through deals and discounts. You can book a service from a local business through Groupon and enjoy the service at the physical store. Essentially, it’s an online-to-offline (O2O) platform.

Today,, Inc. (NASDAQ:AMZN) dominates the e-commerce industry in most parts of the world. However, Groupon still has its competitive advantage—connections with hundreds of thousands of local businesses and their customers. That makes it an attractive acquisition target.

Everyone Wants a Stake in Groupon Stock

In fact, Groupon’s unique asset has already attracted some high-profile investors. In February, Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) disclosed that it holds a 5.6% stake in the company. After the announcement, GRPN stock skyrocketed 41%. (Source: “Form 13F Information Table,” Securities and Exchange Commission, February 12, 2016.)

According to Alibaba’s filing to the Securities and Exchange Commission (SEC), it owned 32.97 million shares of Groupon. That makes Alibaba the fourth-largest shareholder of the company.

You’d expect that after taking such a large stake in Groupon, Alibaba would want a say in corporate governance, but that’s not the case here. Despite its sizable stake, Alibaba isn’t an activist investor.

Why did Alibaba buy millions of GRPN stock shares then? The answer lies in Groupon’s connections with local customers.

Alibaba said, “We bought a very small minority stake in Groupon in order to share ideas between U.S. and China markets. This is a passive holding and if Groupon management would like to exchange experiences with us, we are prepared to share.” (Source: “Groupon Soars Again, This Time After Alibaba’s 5.6% Stake,” Bloomberg, February 16, 2016.)

Alibaba is not the only investor interested in the O2O company. In April, Groupon announced that it had received a $250-million investment from Atairos. (Source: “Groupon Announces $250 Million Investment from Atairos,” Groupon Inc, April 4, 2016.)

Atairos is a private investment fund backed by cable TV giant Comcast Corporation (NASDAQ:CMCSA). The fund was set up last year and run by Michael Angelakis, the former chief financial officer of Comcast.

What’s the reason behind this investment? Potential strategic partnerships.

Comcast Cable’s president and chief executive officer, Neil Smit, said that “Groupon is an established leader in connecting customers with local businesses. The potential in combining Groupon’s local expertise with Comcast’s vast subscriber and advertiser network is something we look forward to closely exploring together.” (Source: Ibid.)

Groupon Stock: The Next Big Acquisition Target?

So, we know that Groupon offers something unique. By the end of the first quarter of 2016, it had 49 million active customers. Moreover, the company has connections with hundreds of thousands of local businesses and knows the interactions between the consumers and vendors. For anyone who wants to expand into the e-commerce industry at the local level, Groupon would be a great acquisition target.

Who might be interested in buying Groupon?

Well, Alibaba would certainly benefit if it can get its hands on this O2O company. Alibaba dominates the e-commerce industry in China, but is yet to impress North American consumers. If the company wants to expand its presence internationally, Groupon would be able to give it a jumpstart.

Internet giants in Silicon Valley might also be interested. Companies like Alphabet Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB) have been putting a lot of effort into local e-commerce. Moreover, they are big enough that the cost of acquiring Groupon wouldn’t put too much pressure on their financials.

At the end of the day, prices matter when you are buying something. The same can be said about mergers and acquisitions.

GRPN stock had huge gains earlier this year, but since its latest earnings report, shares have traced back to around $3.25 apiece. What this means is that Groupon now has a market cap of just $1.9 billion. If some tech giant wants to buy the locally oriented e-commerce company, now could be the right time.