Jana invested in Groupon and Zynga, but it will probably leave the companies alone

May 15, 2013
May 15, 2013

Hedge fund Jana Partners revealed stakes today in online daily deals company Groupon and online game developer Zynga, sending shares of those companies up. Jana is sometimes an activist investor that pushes for the breakup, sale or other major change at companies. But in this case, the fund was probably just looking for good investments at a discount rather than trying to stir things up, sources said.

Since going public in highly anticipated IPOs in 2011, Groupon and Zynga have struggled. Groupon shares are down roughly 65% from its IPO price of $20 per share, while Zynga is down about 66% from its IPO price of $10.

Groupon’s problem? It went on a spending spree, buying companies and hiring sales staff even as growth slowed. The stock price fell, resulting in the firing earlier this year of one of the company’s founders and its CEO, Andrew Mason. On the bright side, earlier this month, Groupon reported better-than-expected earnings, which rose 7.5%. The company is focusing more on the local market, allowing consumers to search for deals in their area, which helps its mobile phone strategy.

As for Zynga, its game Farmville has been somewhat of a one-hit wonder for the company. Lately, though, Zynga has zoomed in on its mobile strategy while reducing its reliance on Facebook as a platform for its games. In April, its shares rose after the company launched an online gambling site in the UK that allows players to use real money.

Jana bought its shares in the first quarter of this year, according to an SEC filing, and is now one of the top 10 shareholders of both Groupon and Zynga. The hedge fund purchased the stocks on the cheap, betting that the companies are making moves that will send their share prices up.

Jana will be a passive investor. But it’s worth noting that both Groupon and Zynga have various share classes that skew power toward the founders. So pushing for changes at the companies wouldn’t be easy, even if they did head south.

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