Groupon's Product Chief To Leave the Company; Shares Tumble 8%

Groupon GRPN on Monday announced that its product chief Jeffrey Holden is leaving the company to pursue opportunities at a non-competing company.

Holden joined Groupon after his startup company, Pelago, was acquired in 2011.

Pelago's prior experience includes nearly 10 years at Amazon.com in four roles, which included Director of supply chain optimization systems, Vice President and Senior Vice President of consumer applications and Senior Vice President of Worldwide Discovery.

Following Groupon's announcement of Pelago's departure, shares dropped more than eight percent, which is causing investors to wonder if one Groupon executive is worth such a sell off.

“Potentially,” said an analyst at Deutsche Bank before revising his position several hours later.

In a note sent to clients at 2:00 a.m. on Tuesday, Ross Sandler, research analyst at Deutsche Bank said that Holden's departure is “a potential red flag.”

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“Our bullish view on Groupon's multi-year turn-around is somewhat up in the air after seeing Head of Product Jeff Holden depart for a non-competitive company,” said Sandler in his early morning note to clients. “While the news dampens the long-term bull case to some degree, Groupon has a deep bench and continues to attract top talent.”

“The Holden news caught us off-guard and is “cooling-off” our thinking around the long-term opportunity to some degree, but Groupon remains in much better shape than it was 12-24 months ago.”

Sandler wrote a second note to clients released at 10 a.m.. The analyst shied away from his red flag reaction and concluded that Holden's departure is “a natural evolution for the company.”

“Holden has been a key tenant to Groupon's success to date, and now some of those responsibilities are moving from a top down to a divisional level within the organization,” said Sandler. “Hence, our view on the situation is that this is a normal evolution and not nearly as bad as the first read (given the limited information from the announcement last night). The ex-Amazon ranks within Groupon continue to grow and the company continues to attract talent.”

Sandler concluded his research note by saying that shares trading off nearly 10 percent “appears to be an over-reaction.”

Shares are Buy rated with a $16 price target.