Groupon Shares Slide as Investors Fret Over Possible Yelp Deal

Investors aren’t buying into

Groupon
Inc.


GRPN -3.99%

’s plans to reverse its yearslong slump by making a splashy deal. Shares of the daily-deals company fell 3.8% Thursday, a day after The Wall Street Journal reported it was pursuing an acquisition, potentially of

Yelp
.

Yelp shares gained 6.1%. Groupon didn’t respond to a request for comment about the stock slide and earlier declined to comment on the Journal’s report.

“Groupon’s stock is under pressure today because of investor anxiety that it may engage in a major transaction,” said

Tom Forte,

an analyst at D.A. Davidson & Co. Groupon would need to assume a “massive amount of debt” to bid for San Francisco-based Yelp, Mr. Forte said, adding that he saw such a deal as unlikely. The market capitalization of Groupon is currently $1.6 billion, while Yelp is valued at $2.6 billion. Still, analysts say investors shouldn’t count Groupon out because its cheap share price could make the company ripe for a takeover.

“We see significant value in Groupon as an acquisition target for multiple-use cases in the local internet landscape,” Wedbush Securities said in a research note earlier this week. The note identified Google,

TripAdvisor
Inc.

and

American Express
Co.

 as possible acquirers. Based in Chicago, Groupon’s share price has plummeted since its 2011 initial public offering. The company’s model of offering daily discounts for purchases at local businesses enjoyed a brief heyday a decade ago but lately has struggled to gain traction. Groupon shares were trading at $2.90 a share on Thursday afternoon, down nearly 90% from their all-time closing high in November 2011. Still, they are up from August, after activist investors began building up stakes in Groupon. The activists have sought to persuade Groupon’s management to buy back stock, enter into a strategic partnership or sell the company. Write to Alexander Osipovich at alexander.osipovich@dowjones.com

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