Shares of Groupon (NASDAQ:GRPN) closed up over 8.5 percent on Tuesday after news broke that Tiger Global Management, the much-watched hedge fund run by Chase Coleman, disclosed a 9.9 percent stake in the daily deals company.
Tiger Global became a celebrity hedge fund after posting a 45 percent gain in 2011, and is reportedly up over 22 percent this year to date. Those returns are exceptional in any market, but compared against a background of 5.3 percent losses on average for hedge funds in 2011, Coleman and fund co-manager Feroz Dewan have quickly become legends.
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The move is particularly interesting given that shares of Groupon have done nothing but collapse since its IPO, and as of Monday were trading 88 percent below their offering price of about $20 per share. Seeing something of a bottom at about $5 per share between August and the beginning of November, shares tumbled to new lows after poor third-quarter earnings and unattractive fourth-quarter guidance.
That being said, the worst could be priced in. Groupon has been taking a hard look at its business model and is trying to shift dependency away from daily deals to become more of a platform for commerce, which is a much more stable and profitable position. Tiger Global isn’t the only fund that thinks shares of Groupon may be ready to gain some value. George Soros, the billionaire behind Soros Fund Management, acquired 2.5 million shares of Groupon earlier in the month. Analysts maintain an average $5.12 per share price target with mean “Hold” recommendation, in line with what Tiger Global calls a passive investment in the company.
Tiger Global maintains a position in several tech underdogs with strong holdings in both Yahoo (NASDAQ:YHOO) and Facebook (NASDAQ:FB). Like most hedge funds, Tiger also has a heavy hand in Apple (NASDAQ:AAPL). Already boasting massive returns, the fund seems to be sitting back, buying cheap, and going long, betting that tech companies that have fallen on hard times now have the worst priced in and have no where to go but up.
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