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Groupon stock turns upward; founding investor transfers stock

Updated: October 6, 2012 1:43PM

Groupon’s stock ticked up 9 cents, or 2.3 percent, to $4.24 on Tuesday, despite news that Starbucks will be using rival LivingSocial to offer a $10 Starbucks gift card for $5 and Wall Street concerns about declines in construction and manufacturing spending.

The shares’ activity — the stock had fallen earlier Tuesday — came on the first trading day since founding investor Eric Lefkofsky transferred a portion of his stock to beneficiaries, but he is not selling any of the stock, his spokesman said.

Groupon’s stock, which suffered a new lowest-yet stock price on Friday of $4.15, had fallen to as low as $4 earlier Tuesday.

Analyst Edward Woo said he expects the stock could continue to go down.

“Until we get good news from Groupon, which may not be until the next earnings report, the stock is likely to keep drifting down,” said Woo, a senior research analyst at Ascendiant Capital Markets LLC, of Irvine, Calif.

Groupon’s stock fell to $5 a share on Aug. 16 and has dropped every day since on Woo’s and other analysts’ continued concerns about Groupon’s competitive viability, financial controls and success in keeping its customer base without having to increase marketing costs. Groupon is now 79 percent below the company’s public offering price.

Starbucks, whose CEO Howard Schultz resigned from Groupon’s board of directors in April, is offering the LivingSocial deal starting at 5 p.m. Tuesday, a Starbucks spokeswoman said. The Wall Street Journal has reported that Schultz was one of a group of directors who urged Groupon to hold off on going public because Groupon wasn’t ready for the scrutiny that would ensue.

Lefkofsky, the largest Groupon shareholder, late Friday transferred 15.7 million shares to a group of 20 advisers, consultants and early investors, and “gifted” 3 million shares to his family’s charitable foundation, his spokesman said. The shares were moved from a limited liability corporation, 600 West Groupon LLC, that is managed by a firm that Lefkofsky and his wife own.

No directors or executive officers received a distribution, the spokesman said.

“Now is the most practical time to distribute the shares to their rightful owners,” said Lefkofsky spokesman Charles Sipkins of Sard Verbinnen & Co. “It didn’t make sense to do so before the lock-up as the beneficiaries would have been restricted from selling until [the stock lockup] expired. We view this as just part of our natural evolution as a public company.”

Such transfers are usually for tax purposes, tax and compensation experts said Tuesday.

Lefkofsky owns 109.4 million shares, or about 17 percent, of Groupon.

Co-founding investor Brad Keywell acquired option grants totaling 418,795 shares. That brought his total holdings to 40.8 million shares.

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