Groupon’s stock continued its implosion yesterday, as two high-profile board members quit the board.Howard Schultz of Starbucks and Kevin Efrusy of investor Accel Partners bolted. Groupon replaced them with financial types from American Express and Deloitte.
Although the moves were spun as “adding financial experts to the board,” the real story is the departure of Schultz, who, at best, feels he has better things to do. (At worst, he’s fleeing a sinking ship before it takes him down with it.)
Another potentially interesting data point: The first Groupon executive quoted in the press release was not CEO Andrew Mason but Chairman Eric Lefkofksy. Perhaps Lefkofsky is reasserting control over the company?
Groupon’s stock crashed through $11 on the news, hitting a post-IPO low of ~$10.70. That gives it a market cap of about $7 billion, or about 3X this year’s revenue. That’s a far more reasonable valuation than the ridiculous $28 the stock hit on the morning of the IPO, but it’s still not a bargain-basement price. Given the uncertainty about what Groupon’s profit margin will eventually be, the stock could presumably trade at an even lower multiple.
We continue to think Groupon is building a real, viable business, and we expect that at some point it will move past this constantly-shooting-itself-in-the-foot phase. But Schultz’s departure is not encouraging.
SEE ALSO: No, I Still Wouldn’t Buy Groupon Stock