Groupon's Stake in SumUp Drops in Value

Shares of Groupon plummeted by 25% after the company revealed that it sold a portion of its stake in SumUp Holdings, a European electronic payments company. The sale, which amounted to 9.4% of Groupon's 2.3% stake in SumUp, fetched €8.4 million (approximately $8.9 million). However, the concerning issue lies in the surprisingly low price at which the transaction took place.

With this purchase, the implied valuation for SumUp now stands at €3.9 billion ($4.1 billion), marking a significant decrease from its previous valuation. Just a few months ago, in June 2022, SumUp had an impressive funding round that valued the company at $8.5 billion. Comparatively, this indicates a drop of over 50% in SumUp's valuation.

In response to these developments, SumUp has yet to provide any comments or statements.

Groupon, on the other hand, has suffered a considerable impact on its stake value. The value of Groupon's stake, including the portion recently sold, has now diminished by approximately $100 million, totaling $94 million. Considering Groupon's current market capitalization of $360 million, this loss represents a significant setback for the company.

Following this news, Groupon's shares (ticker: GRPN) experienced a sharp decline of 26%, reaching $11.26 by midday.

Back in January 2022, Groupon's shares had surged following a Bloomberg report about SumUp considering a new financing round that would value the company at €20 billion ($22.6 billion). Interestingly, in December 2021, an investment firm called Prescience Point Capital Management highlighted Groupon's stake in SumUp, which had been acquired in 2013, stating that the market had overlooked its significance.

Groupon Sells Stake in SumUp as Part of Strategic Asset Monetization

Groupon recently announced that it has sold a portion of its stake in SumUp, a leading provider of point-of-sale card reader systems. The transaction involved multiple buyers and sellers, including existing shareholders of SumUp. Groupon expects the sale to be completed on or before October 23.

This move aligns with Groupon's ongoing efforts to improve its liquidity position and optimize its portfolio of assets. With a focus on monetizing non-core holdings, the company aims to strengthen its financial position and streamline its operations.

It is worth noting that Groupon issued a "going concern" warning in its latest quarterly financial filing. The warning stemmed from the company's continued cash outflows and operating losses, which raised doubts about its ability to meet obligations in the coming year. However, strategic divestments like the sale of its SumUp stake demonstrate Groupon's commitment to proactively address its financial challenges.

The market for venture-backed fintech companies has experienced significant fluctuations in valuations recently. For instance, Stripe, another prominent player in the industry, recently raised funds at a reduced valuation of $50 billion, down from $96 billion earlier this year.

Groupon's decision to sell its stake in SumUp highlights its strategic approach to portfolio management and its dedication to optimizing shareholder value. By leveraging opportunities to monetize assets, the company aims to strengthen its financial outlook and navigate the evolving market landscape successfully.