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Shares of Groupon Inc. added more than 10 percent Tuesday after a hedge fund said it bought a 9.9 percent stake in the battered online deals company.
THE SPARK: Tiger Global Investments LP disclosed its purchase of 65 million shares in a securities filing on Monday. Tiger Global also owns a small stake in Facebook Inc.
BACKGROUND: Groupon Inc. pioneered the online daily deals market, offering subscribers deep discounts on everything from spa sessions to restaurant meals to toe fungus treatments. To expand its business, and in an attempt to distinguish itself from copycat online deals websites, Groupon has tried to establish itself as a local e-commerce company. It now also sells electronic gadgets and other goods. But its revenue growth rate has declined steadily since the company went public late last year, taking a toll on its shares.
The purchase by Tiger Global is a sign that at least one big investor has confidence in the company.
ANALYSIS: In a note to investors Monday before Tiger Global's stake was disclosed, Deutsche Bank analyst Ross Sandler said he's "warming up" to a possible upgrade of Groupon's stock, which he currently rates "Hold." The notion that "everything is imploding" at Groupon is wrong, he said.
The company's North American business is "fairly stable" quarter-over-quarter, though growth slowed from a year ago, he said Still, the company's European business "is still several quarters from stabilization" and has "significant issues."
STOCK ACTION: Chicago-based Groupon's stock rose 29 cents, or 9.5 percent, to $3.40 in afternoon trading. Groupon, which went public at $20 on Nov. 4, 2011, has ranged from $2.60 to $25.84 since. It has not traded above $10 since July.