Groupon Gets New Activist Investor

Richard Merage, the man who created Hot Pockets, disclosed stake that he bought in Groupon on Monday (Dec. 30). Merage and his company, MIG Capital, based in Newport Beach, California, disclosed the 5 percent stake in the eCommerce company, the reason for which was that the stock was “undervalued, and represented an attractive investment opportunity,” he said.

The filing said that Merage will possibly engage in discussions with the board of directors, as well as discuss capitalization, ownership structure and board compensation or operations — and could potentially buy more shares. He is also seeking a seat on Groupon’s board.

The company said it had been in a dialogue with MIG Capital, and was aware of Merage’s interest, evaluating him as a director candidate as part of its regular assessment of the board’s needs and makeup. Groupon was MIG Capital’s largest stake in a previous SEC filing.

Merage and his family sold their company Chef America — best known for the Hot Pockets brand — to Nestlé in 2002 for $2.6 billion. In August, it was reported in The Wall Street Journal that “activist investors” were circling Groupon, trying to persuade management to do a stock buy-back, enter into a strategic partnership or sell the company.

Groupon shares closed at $2.375 on Monday, 1.3 percent higher than they had been. However, they remained close to an all-time low, even at that. The company went public in 2011, and started trading at $28, but it has not seen that kind of price since.

Founded in the late 2000s, Groupon hit big during the Great Recession, as people were hungry for the discount deals the service offered. Merchants also had a need to get rid of excess products during a tumultuous and depressed time for the economy. However, though initially burning bright, its flame went out as the economy improved, and demand for Groupon’s deep discounts became less prominent.

Groupon recently partnered with travel industry connector DerbySoft, which has given the company a leg up on rooms people can book directly via Groupon.