Groupon breaks hard: Now solidly below the IPO price

Summary:Groupon has significant question marks as a business and competition from Amazon backed Living Social will be tough.

Groupon shares have broken below their initial public offering price of $20 and may cast a pall over other technology debuts on the public markets.

Groupon shares fell throughout the day and closed at $16.97.

What happened?

For starters, Groupon has significant question marks as a business and competition from Amazon backed Living Social will be tough. In addition, it's easier to borrow shares of Groupon to short them, reported Bloomberg. A short sale occurs when you borrow shares betting that they will fall. You sell shares back lower and pocket the difference.

If any stock had enough question marks to attract shortsellers it would be Groupon.

Wedbush Securities started coverage of Groupon with a neutral rating on Nov. 17 and summed up the situation.

While Groupon has done a great job creating the fast growing market of daily deals email marketing, we believe that its leadership position is facing challenges by many new competitors. In addition, industry growth rates are likely to slow down as consumer fatigue sets in or the market reaches saturation with merchants and consumers.

Related:

Topics: Legal, Banking, CXO

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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