Groupon (NASDAQ:GRPN), the deals platform, is in quite a peculiar situation. Its ~5% ownership in a startup, SumUp, could be more valuable than the entire company itself…
What’s the big deal? Groupon has struggled since going public in 2011 — with sales consistently declining and its stock down 94%.
- Groupon reportedly owns a 5% stake in SumUp — currently worth nearly half of Groupon’s value — according to Prescience Point Capital.
- SumUp is considering a new investment that would value it at $22.6B — meaning Groupon’s investment in SumUp would be worth more than Groupon.
Since the news, Groupon is up 35% — with Prescience expecting more to come. But to understand Groupon as an investment, one needs to understand SumUp…
Who is SumUp? In 2013, Groupon invested in SumUp — a payments processing company — similar to Stripe, PayPal, Block (Square).
- SumUp — which offers contactless payment and debit/credit card readers — benefited from COVID.
- 9 years later — SumUp has become one of the most valuable UK startups.
Per Prescience, Groupon hasn’t publicly disclosed its exact SumUp ownership — only that its ownership is in the “mid-single digits”.
Big target: Prescience raised their price target to $88, seeing the following as catalysts:
- Prescience believes Groupon will soon confirm its ownership — possibly during its Feb 16 earnings call.
- If SumUp successfully raises funds and a higher valuation, Groupon’s stock could go up.
They also believe analysts haven’t incorporated SumUp’s value into Groupon — who would then have to raise targets on Groupon. At this point, an investment in Groupon isn’t a bet on a struggling deals business — but a bet on SumUp and the payments industry.
