Groupon Investors Currently Pricing In An 'Unlikely' M&A Scenario

Shares of Groupon Inc GRPN took a breather on Tuesday after more than doubling in value following a strong earnings print and market chatter of pending sell of the company to its minority stakeholder, Alibaba Group Holding Ltd BABA.

Aaron Turner of Wedbush commented in a note that an acquisition by Alibaba is "unlikely."

Related Link: Source: Don't Jump To Conclusions On Alibaba's Groupon Stake

Turner mentioned in his note that Alibaba has a history of initiating investments in various companies to "get exposure and gain knowledge." However, the analyst pointed out that Alibaba also has a history of acquiring "very few" companies outright.

Turner did however entertain a take-out price, noting that Alibaba were to acquire Groupon, it would need to do so at a similar valuation seen in QVC's acquisition of Zulily at 23x forward EBITDA.

Bottom line, Turner stated that Groupos CEO Rich Williams has the potential to "catalyze renewed growth" but would need to see signs of the initiatives "bearing fruit" before becoming constructive on the stock. As such, Williams initiated coverage of Groupon with a Neutral rating and $4 price target.