Why Groupon Stock Plummeted by 27% on Wednesday

Groupon (NASDAQ: GRPN) published its latest set of quarterly figures after market hours Wednesday, and investors reacted rather negatively to the news. Combined with a new development about financing, the company's latest communications didn't make them happy. They expressed their displeasure by trading down the stock by 27% the following trading session. This was on a day when the S&P 500 index essentially traded sideways.

Revenue declined, but the bottom line flipped in the third quarter

In its third quarter, Groupon earned revenue of $114.5 million. This tally was down by 9% year over year. It was on the back of an 8% decline in gross billings, which landed at slightly under $299 million. The news was much better on the bottom line, where the online deals purveyor flipped to a GAAP profit of $13.9 million ($0.33 per share) against the third-quarter 2023 loss of more than $41 million.

According to data compiled by Zacks, Groupon trounced the average analyst estimate of a loss of $0.25 per share. It came up almost 4% short of the consensus revenue forecast.

In its earnings release, Groupon attributed the revenue decline to "an increase in local voucher redemption rates" in its core U.S. business. As for the smaller international segment, the company was hurt by its exiting the local deals segment in Italy.

Time for new notes

While the surprise flip into profitability was a positive development, the notable revenue decline was not. This was compounded by Groupon's news that it is restructuring one of its current financing arrangements.

It has agreed with certain, unnamed holders of its 1.125% convertible senior notes that mature in 2026 to exchange them for new notes at a 6.25% rate maturing in 2027. The aggregate principal amount of both the notes being exchanged and the new securities is nearly $176.3 million. Certain holders of the existing notes have agreed to sell an aggregate $21 million worth of those securities for a collective gross cash payment of $20 million.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.