A Reverse Stock Split Isn't the Answer, Groupon
Groupon (NASDAQ: GRPN) is in a funk, and it's willing to play a bad card that will sink its losing hand. The daily deals specialist's board is approving a reverse stock split to artificially inflate its share price, and shareholders will get to vote on the proposal come June. There aren't too many companies that have gone this route and done right by their stakeholders, but a lot of things aren't going right at Groupon these days.
Tuesday afternoon's report was a disaster at every turn. Revenue plummeted a sharper-than-expected 23% decline to $612.3 million, its weakest top-line tally in the holiday-spiked fourth quarter since 2011. Analysts felt the dip in revenue would be roughly half what Groupon ultimately delivered. Its adjusted profit of $0.07 a share is also about half as much as Wall Street was targeting.
Groupon announced that it would be dumping its low-margin goods business. It will also suspend selling new memberships to Groupon Select, the premium subscription platform that it launched just six months ago to give its most active customers deeper discounts. However, if you have a sense of stock split history, there's probably nothing as bad in Tuesday's horrific financial update as knowing that most companies shifting into reverse never shift back into drive.
Source Fool.com
