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Shares of Groupon Inc. dropped Monday, after the online-deal company said it expects to lay off or furlough more than 40% of its staff, as the COVID-19 pandemic has resulted in a “material deterioration” of its business.
Groupon also said it adopted a shareholder-rights plan, which is often referred to as a “poison pill,” to defend against an investor or investor group looking to take advantage of the sharp selloff in the stock price to acquire control of the company. “The [rights plan] may cause substantial dilution to any person or group that attempts to acquire the Company without the approval of the board,” the company said in a statement.
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The stock GRPN, -3.16% slumped 3.2% to close at 87 cents. Although it finished 77.6% above its record closing low of 49 cents on March 18, it has still plummeted 67.2% year to date. In comparison, the S&P 500 index SPX, -1.01% has lost 15% year to date.
The company disclosed in a filing with the Securities and Exchange Commission that it had approved a “multi-phase” restructuring plan, which included expectations to “terminate or furlough” about 2,800 employees in total, which represents about 44% of its workforce. The first phase of the plan includes cutting 1,400 jobs, most by the end of the second quarter and the rest by July 2021.
The company plans to begin the next phase of the restructuring by the end of the third quarter, and expects that will include additional job cuts, facilities exit costs and noncash impairment charges. In total, Groupon expects to record up to $105 million in charges as a result of the restructuring.
Groupon had said in its 2019 annual report that it had 6,345 employees as of Dec. 31, including 2,358 employees in North America.
The restructuring comes as the company said its business has deteriorated, as businesses have closed as a result of measures to prevent the spread of COVID-19, the illness derived from the novel strain of coronavirus first identified in Wuhan, China in December. The company said after local units grew 7% from a year ago in January and February, local units tumbled 50% in March. So far in April, local units have plunged 70% in North America and 80% internationally.
The company expects revenue of $345 million to $385 million, compared with the FactSet consensus of $444.4 million. Gross billings of $775 million to $835 million, while the one analyst that provided a billings estimate to FactSet was expecting $984.1 million.
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The company said it witnessed a significant increase in refunds in the first quarter, which will weigh on results for the quarter and potentially for the rest of the year.
Groupon also said it plans to “phase down” its goods category, as it shifts toward a third-party marketplace model rather than fully exiting the category. Under the new model, which is expected to go fully in effect by the end of the year, merchants would assume responsibility for fulfillment and returns.
In February, the company had said it was planning a “quick exit” from the goods category.
Among other actions taken to preserve capital, Groupon said it was implementing a hiring freeze, eliminating merit increases and reducing marketing expenses.
In addition, the company said it was taking advantage of the SEC’s amended guidelines for the disclosure of material information, to delay the filing of its 10-Q quarterly report.
Separately, the company said the shareholder-rights plan it was adopting would be exercisable if an investor or investor group became a beneficial owner of 10% or more of the company. If the plan becomes exercisable, each rights holder will be entitled to buy a number of shares at an exercise price that is half that of the market value of the shares at that time.
“Given the current unprecedented environment and trading levels as well as the importance of maintaining focus on the company’s operations, safeguarding the welfare of employees and serving customers, the board believes adopting the Rights Plan is in the best interest of all Groupon stockholders,” Groupon said.
