Topic: Legal

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.

By Larry Dignan for Between the Lines | November 23, 2011 -- 06:44 GMT (22:44 PST)

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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.

Topics: Legal, Banking, CXO

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14 comments

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How much did the directors take out?

This was the most influential statement to me:

"Altogether, $946.8 million, or roughly 86% of the funds raised across the three investments, was paid out to Groupon directors, officers and stockholders" (mashables et al on Groupons original IPO)

If the insiders drew money from the company like crazy, why would outsiders pump more money in? What do they know that other don't??

---
%Insert anti-Republican truth that Fox never reports here%

guihombre
23 November, 2011 07:15

Reply Vote
- Highly stupid!
 
 How is any of that information related to FOX or to republicans. Most likely, the management and ownership at Groupon are crooked liberals, via the same greedy deals that personify crooks like Nancy Pelosi and the deals made by Obama with Solyndra.
 
 adornoe
 23 November, 2011 13:00
 
 Reply Vote
 - My tag lines
 
 Adornoe, my --- tags, indicate a footer, having had to wade through lie after lie from a bought and paid for press, and a seemingly endless false counter allegations by turfers. I'm so sick of it, I'm going to add a little painful truth that the press never says with each and every comment. As to Groupon, I didn't know anything about them, when I read up on them the story repeated again and again that insiders were taking money out pretty much as fast as investors put it in, suggests that it should be avoided. ---- Republicans raised taxes when they got back in 2010, 1/3rd of middle and low income tax paying Americans pay more, while the rich got their tax cuts extended. Fox didn't report the tax hike. Not one word.
 Remember that next time Republicans pretend to 'never raise taxes'.
 
 guihombre
 23 November, 2011 19:26
 
 Reply Vote
 - guihombre: All 100% lies
 
 Republicans raised taxes when they got back in 2010, 1/3rd of middle and low income tax paying Americans pay more, while the rich got their tax cuts extended. That's a lie. What did happen is that, congress and Obama decided to keep the Bush tax cuts in place, and it didn't raise anybody's taxes. It kept taxes low for everybody and for the economy. Without those tax cuts remaining in place, there would have been a tax increase on the investment class and on businesses, and, no doubt the economy would be even worse than it is now. Fox didn't report the tax hike. Not one word. That's another lie. FOX did report on the decision by congress and Obama to keep the Bush tax cuts in place, and no doubt FOX reported on it more than any other news source. Remember that next time Republicans pretend to 'never raise taxes'. That's still another lie. Republicans, even if they propose any legislation which in effect raises taxes on anybody or any business, will still ALWAYS win on the issue of taxes. No matter what happens, the republicans will never raise taxes to the levels which the democrats always do, and which cause great harm to the economy and to people's purchasing power. But, the biggest fact is that, when it comes to taxes, the republicans will always be known as the party of tax cuts, which they're proposing to do right now with the current election campaign. Democrats, on the other hand, are very busy proposing economy killing higher taxes. When it comes to what hurts the poor and the lower middle-class the most, is the lack of jobs, and more jobs will be lost with high taxes. The more government removes from the economy in the form of high taxes, the more poorly the economy will perform and the fewer jobs there will be, and the less the government will be able to collect in taxes to pay for its responsibilities, and that is being witnessed right now with the government having to borrow hundreds of billions of dollars, yearly, to pay its bills. The one sure thing about democrats and their philosophy is that, it's logically insane. So, stop your nonsensical "tag line addendums", because, they only reflect how much of a dum-dum you are.
 
 adornoe
 28 November, 2011 08:47
 
 Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

So should anyone be surprised? Try as hard as I can, the business model doesn't make sense.

Romas27
23 November, 2011 12:01

Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

The barriers to entry in this market are minimal. Anyone who already has access to a large group of buyers (e.g., Amazon, Google, Facebook) can do and is doing what GroupOn is doing. But as one of the commenters pointed out, this is mainly about the site's creators cashing out. Like so many other web entrepreneurs have, who are now sailing the world on their yachts, after having created nothing of any lasting value. But no one said life had to be fair.

datrappert
23 November, 2011 12:16

Reply Vote
- Groupon was an immediate overpriced tech stock bubble,
  
  but, there are other tech stock bubbles out there, and when they burst....
  
  Look out!
  
  adornoe
  23 November, 2011 13:03
  
  Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

This is no surprise - Groupon has a worthless business model. Not sure what all the fuss was about.

I don't think its fair to compare Groupon to some of the more useful companies that might have IPOs in the coming months. Groupon's bubble was destined to burst.

wendellgee2
23 November, 2011 13:41

Reply Vote
Jim Cramer was on record about that deal.

Don't buy, don't buy. If you bought into Groupon in the after market you were suckered. Avoided that like the plague.

Snooki_smoosh_smoosh
23 November, 2011 14:09

Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

I hate to so I told you so ... no I don't <img border="0" src="http://www.cnet.com/i/mb/emoticons/wink.gif" alt="wink"> This was the founders getting their money out while investors put theirs in. Their assets are minimal, and their market is crowded. Their business plan is limited, with no Plan B. In the UK, most of their offers are 'Mid week breaks' at 'bargain prices' - which are pretty much standard prices for mid week hotel stays, and available all over. People learn, and I reckon they've peaked. They may plateau, they may drift down - but superstar they ain't. And haven't been since immediately after they launched.

Heenan73
23 November, 2011 16:23

Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

I thought the Groupon concept had some merit. After trying to do deals three times and all falling through (though they did quickly refund my money), I've marked their offers as spam.

mfinca
23 November, 2011 16:55

Reply Vote
What?? Groupon's stock not worth what people paid? No way ......

Who could had ever predicted this? Answer: Anybody with a working brain. You have a company that is worth nothing claiming earnings that they could not backup. On top of that, anybody can easily see that the company has no bussiness longevity. They are neither a fad or a "ground breaking" business. Anybody st@p!d enough to had purchase a stock on a new dot-com company selling toilet paper for stock deserves the losses and a lot more.

wackoae
23 November, 2011 20:03

Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

This is a surprise to anyone why?

DigitalAtheist
24 November, 2011 18:53

Reply Vote
RE: Groupon breaks hard: Now solidly below the IPO price

Groupon reminds me of too many dot coms of the 1990's: big on selling the ideas, dismal business execution and financials that area train wreck ready to happen.

Scatcatpdx
26 November, 2011 12:06

Reply Vote