There was a time when Groupon Inc (NASDAQ:GRPN) was regarded as the next big thing, but the situation has changed quite dramatically for the online deal company in recent years. On Thursday, the Groupon stock declined by as much as 7%, and it is believed that the reaction has been triggered by the slew of class-action lawsuits that the company has been subjected to in recent days.
Five Class-Action Lawsuits
As many as five class-action lawsuits were announced quite recently and the reaction from the market has not come as a complete surprise. The stock declined to $1.22 a share yesterday.
The lawsuits in question are similar in nature. The lawsuits allege that the company was responsible for having misled investors with regards to its performance and the future of the business in Q4 2019. Some of those lawsuits have focussed on Groupon’s Goods business. The company had tried to drive sales through Goods during the holiday season but had not been frank about customer engagement metrics. Groupon has reported declines in revenues in 16 back to back quarters and is all set to do a reverse stock split in order to keep its stock price above the critical $1 threshold.
The situation with the company is not great at this point in time, and the class action lawsuits could further dent the stock price. However, it is also important to keep in mind that there are many other issues at play with Groupon. The Goods business could be spun off into a third-party marketplace later on, but all those plans are shelved for now due to the coronavirus pandemic.
However, at the same time, it is important to note that the introduction of local experiences offers could be a major source of revenue once the lockdowns are lifted. Consumers will be eager to for deals in their quest to move around a bit more. The reverse split may protect the stock price, but the company would have to do more in order to resurrect the situation.