In case you haven’t noticed, Groupon Inc (NASDAQ:GRPN) stock has shot through the roof in 2016. In just over three months, Groupon stock surged more than 40%.
There is a good reason behind GRPN stock’s recent climb. Groupon has a highly sought-after asset: connections with local businesses and consumers. As the go-to choice for group buying in many parts of the world, the company has an unrivaled level of involvement in local commerce. And that asset looks rather attractive these days.
First up was the Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA). About two months ago, Alibaba disclosed a 5.6% stake in Groupon. The news sent GRPN stock up more than 40% on the day of the announcement. (Source: “Groupon Soars Again, This Time After Alibaba’s 5.6% Stake,” Bloomberg, February 16, 2016.)
Alibaba’s Securities and Exchange Commission (SEC) filing suggested that it owned 32.97 million shares of Groupon. That makes Alibaba the fourth-largest shareholder of the company. (Source: “Form 13F,” U.S. Securities and Exchange Commission web site, February 12, 2016.)
Despite the size of its stake, Alibaba is not looking to get involved in corporate governance. Instead, Alibaba wants to learn about the consumer market in the U.S. from Groupon. It said that the goal is to “share ideas between U.S. and China markets.”
Now, there is another investor onboard. On Monday, April 4, Groupon announced that it has received a $250 million investment from Atairos. (Source: “Groupon Announces $250 million investment from Atairos,” Groupon Inc, April 4, 2016.)
The name “Atairos” might not sound that familiar to you, but what about Comcast Corporation (NASDAQ:CMCSA)? Yep, Atairos is an investment firm backed by Comcast.
The investment firm is headed by Michael Angelakis, the former chief financial officer of Comcast. He launched Atairos earlier this year with capital commitments of around $4.1 billion, most of which came from Comcast.
With the new investment, Angelakis will join Groupon’s board of directors.
This time, the buyer is looking to “identify and implement potential strategic partnership opportunities” with Groupon. (Source: Ibid.) In particular, Comcast is interested in taking advantage of Groupon’s connections with local businesses.
“Groupon is an established leader in connecting customers with local businesses,” noted Comcast Cable President and CEO Neil Smit in a company press release. “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.)
You see, Comcast is the largest cable operator in the U.S. But the industry landscape has been changing, as viewers embrace on-demand video streaming. By teaming up with Groupon, Comcast could bring more local businesses to buy its advertising.
The Bottom Line on GRPN Stock
The proceeds of this deal would be used for general corporate purposes for Groupon, including stock buybacks. The company also announced a $200-million increase to its existing share repurchase program and extended it through April 2018.
If there is one thing true in economics, it would be the law of supply and demand. When more investors want a piece of Groupon, its value would go up. That’s why GRPN stock could see further upside down the road.