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Shares of Groupon dropped more than 22 percent on Thursday following the company's announcement that it had acquired competitor LivingSocial for an undisclosed sum. The company's CEO Rich Williams said he was confused by the sell-off, and that the acquisition was "non-material."
"It was a non-material acquisition. We look at that in multiple ways, both the financial side and now with what we know about with integrating businesses and operating this business well; we don't see it as a material distraction from our day-to-day operations," Williams told "Mad Money" host Jim Cramer.
Groupon made a significant comeback this year, with the stock up more than 70 percent for the year as of Wednesday. When it reported earnings, both the top and bottom line numbers were slightly better than expected. It is also growing its user base and rationalizing its global footprint.
Investors feared that the LivingSocial deal could make it harder for Groupon to turn a profit in the near-term. However, Williams says he never promised instant change when he took over a year ago. One of his main goals was to simplify and streamline the business, which meant removing businesses that weren't core and have an opportunistic approach for mergers and acquisitions.
"Most people that set out on the magnitude of the change that we set out end up having conversations about roads to recovery that are years long," Williams said. "When we set out, we said this wasn't going to be instant. It's not going to be simple. But in that path we have also delivered now four quarters of really steady progress."
Cramer speculated that shares merely sold off on Thursday because they had run up so much going into the quarter. The stock was priced for perfection, and what investors got was merely good. Williams agreed, stating "I think maybe there was some fast money moving out and some perfection expected, but I think we delivered solid results."
Williams said Groupon looked at LivingSocial through the lens of whether it would allow the company to acquire a significant amount of customers, while also being cost effective. He feels confident that the acquisition will boost the rate of return on a time horizon ultimately.
"We look at it just as like any customer acquisition we do, which is a 12 to 18 month horizon, is it going to pay us back on a gross profit basis. And in this case, we feel strongly that it will," Williams said.
Correction: This article was updated to reflect that Groupon is rationalizing its global footprint.