Knight Capital Group Inc. (NYSE:KCG), after losing over 75% of its market value in a matter of a week due to a $440 million trading loss, is now up over 25% over the past month. Knight is currently entertaining a buyout offer for around $3.50 from Getco Holdings, to acquire the remaining shares that the private equity company does not already own. Cohen may likely have taken his shares off the table following the huge loss after the trading debacle. Knight is expected to only see single digit revenue growth in 2013. We see the trading firm’s 8% long-term growth rate as decent but unspectacular. Investors with enough capital to possibly profit from the buyout could see some upside, as the offer price is nearly 30 cents higher than the stock’s current market price.
Groupon Inc (NASDAQ:GRPN) is another high-profile company that has had little success convincing investors that its business model is sustainable. It appears that Cohen still sees a high degree of investment risk related to the daily deals company. Groupon is down over 75% year to date, and poor Q4 guidance comes as a result of uncertainty regarding the company’s revenue-generating capabilities. This guidance shows expected operating income to come in at around $40 million, well below consensus of $65 million. Last quarter’s results also showed weakness in Groupon’s core business, which saw a 2% revenue decline (yoy) in its North American segment.
In short, we believe that Cohen has made some key selloffs based on company-specific issues, though most are supported by the fundamentals as well. It appears the excitement in Ensco’s shares may be overdone, and Lockheed will likely see more pressure from defense spending cuts. Archer, meanwhile, could be negatively affected by an uncertain crop outlook, not to mention an unstable economic backdrop. The trading firm Knight might see a boost in the near term due to a buyout, but on a standalone basis, the company continues to see issues regarding trader confidence. Groupon’s business model has been in question for several quarters, and rumors of a Google buyout cannot prop up the stock’s price forever.