NEW YORK (TheStreet) -- Groupon (GRPN) has a strong business model with expanding mobile app downloads, brand recognition, explosive growth potential, cross-selling capability and first-mover advantage.
It also has Eric Lefkofsky commanding the ship. He may be good or even better than good, he's not good enough. The stock has been falling and is now down nearly 34% for the year to date, as of its Monday close of $7.78.
If Groupon was a $50 million company I might like Lefkofsky better, but for a $5 billion Groupon he isn't right for the job (although based on that stock performance he's better than Andrew Mason, whom Lefkofsky replaced about a year ago.) Lefkofsky clearly embodies many skill sets, but marketing isn't one of them.
If you're a current shareholder I feel for you. A crash like Friday's is tough to take, and I think it's fair to call a 22% one-day drop a crash because it sure wasn't a soft landing. Usually when a stock implodes from an earnings announcement it takes one or two more sessions for the market to fully discount what happened.
If the company's board hired experienced effective management, I would buy shares with both fists. I like the model and the shares offer a compelling risk to reward proposition. However, absent new blood, I don't envision a change of course in the company or stock anytime soon.
Still, by Wednesday or Thursday, Groupon may demonstrate a base of support and investors should see an up day for shares. In fact, I posted a Real Money Pro trading idea for active traders that may complete its setup as early as Wednesday.
For day traders and overnight swing traders that's fine and dandy, but what about long-term investors? I'm bullish in the long term, but it's going to take time, and the company needs changes at the top. Lefkofsky owns enough shares that it's more or less up to him if he wants to step down or not. Maybe he owns a sufficient number of shares that financial considerations will outweigh his desire to remain at the helm.
Let's take a survey of the landscape where we currently find Groupon.
If the market is willing to give a 100+ price to earnings multiple to Amazon (AMZN), Tesla (TSLA) and Twitter (TWTR), it's hard to imagine Groupon not receiving an expanded price multiple with the right leadership. Speaking of Twitter, it's as proper place to begin demonstrating how inadequate Groupon's leadership is at marketing.
"Make life less boring" is the tagline on Groupon's Twitter page. "Make life less boring" may cut it for a high school marketing project if the students are comfortable receiving less than an A, but if "less boring" is the best you have to offer, you need to go.
I know I'm nitpicking. But this is a marketing company -- it offers marketing services for others. Take a look at Groupon's Facebook (FB) page. Where is the "Make life less boring" message? Effective marketing requires a coordinated repetition of the message. In fact, I don't see the message on the Groupon home page. It's as if Groupon's Twitter page is on its own.
Unfortunately for shareholders, another place lacking marketing savvy is the conference call.
Consider the example below from the company's most recent call on Thursday. Lefkofsky's statement is filled with poor choices in how to frame a message. He may not fully know it, but a CEO is the head cheerleader for a company. If a CEO can't create enthusiasm for a company, the stock won't likely reach its full valuation potential:
"...The majority of our customers in North America still have no idea they can come to Groupon and search among our 80,000 deals in real time"
Instead of emphasizing Groupon's ineffective communication failure with current and potential users, perhaps highlighting available growth capacity in the marketplace is a better private and public strategy.
The negative emphasis actually does make life more boring and the stock less appealing.
At the time of publication, Weinstein had no positions in securities mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.