GRPN stock is tanking today after Groupon (NASDAQ:GRPN) reported fourth-quarter financial results that missed analyst expectations for the top and bottom line, leading the firm to announce an overhaul to its operations.
Worst Single-Day Performance
The e-commerce firm posted Q4 earnings of 7 cents per share, well short of analysts’ expectations of 15 cents per share, according to Refinitiv. Groupon reported US$612 million in revenue for the fourth quarter, which was down 23% from the previous quarter and came in well short of the US$709 million that analysts were expecting. The results have led to the worst single-day performance for GRPN stock since going public in 2011.
“We did not deliver the financial performance we expected during the fourth quarter and we recognize we must move swiftly to put Groupon back on a growth trajectory,” said CEO Rich Williams.
Reverse Split in GRPN Stock
The disastrous quarterly performance has led management at Groupon to undertake an expansive overhaul strategy in an effort to turn the company’s fortunes around. Firstly, Groupon will abandon the sale of physical stuff like toys, beauty products, clothing, electronics, or household items, and will instead revert to focusing on marketing local experiences. The goal is “being top of mind when our customers are looking for the best things to do around them,” according to Williams. GRPN stock is currently trading for $1.80.
Secondly, Groupon will undertake a reverse stock split of between 1-to-10 and 1-to-12 in an effort to artificially inflate the value of GRPN shares. However, a study at NYU Stern School of Business and Emory University examined 1,612 reverse splits that were executed in a 40-year span and found that such splits underperformed the market by 16% a year following the stunt, with the gap widening in the second and third years. Investors will vote on the split in June, but with GRPN stock down a massive 40% today, it looks as though the damage is already done.
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