Groupon shares open up 40%

http://techcrunch.com/2011/11/04/groupon-ipo-shares-pop-40-on-first-trade-debuts-at-17-8b-market-cap/

by phjohnst • 15 years ago

54 58 15 years ago

raganwald3• 15 years ago

How many of the folks who bought these shares believe strongly in Groupon’s fundamentals and plan to “buy and hold?” Raise your hand.

...

Crickets.

kokey• 15 years ago

While others don't know when it will be a good time to short it, even though they want to. If you get it wrong you can get burnt.

With more Linkedin stock coming onto the market and the possibility of Facebook next year, things can get very interesting.

I like to buy and hold. I don't buy tech stocks. I work in IT. It might say something about having more blind confidence in predicting markets I understand less, or it might say something about tech stocks.

mrkurt• 15 years ago

Just tell people you're diversifying.

sunchild4• 15 years ago

When this Groupon offering sorts itself out (and it will), it will have a negative effect for Facebook and other IPOs in the pipeline.

peterb• 15 years ago

"Groupon is only floating a small amount of shares, 35 million – about 5.5% of its 637.3 million shares outstanding."

This reminds me of Jason Fried's prank that 37 Signals valuation tops $100B! http://37signals.com/svn/posts/1941-press-release-37signals-...

smackfu2• 15 years ago

I guess, but that is how private companies are valued every day. I sell you 5% for $1 million, we are both agreeing that the company is worth $20 million.

jsm386• 15 years ago

But Groupon is now a public company and what they've done isn't exactly normal (though LinkedIn did something similar...and of course yesterday the follow-on was announced):

Groupon floated a record-low percentage of its total outstanding shares among U.S. Internet companies, helping to stoke demand. Only 4.7 percent of the stock was made available to the public, based on the offering terms. That’s less than in any U.S. Internet company IPO of more $200 million since at least 2000, Bloomberg data show.

http://www.bloomberg.com/news/2011-11-03/groupon-said-to-rai...

wavephorm• 15 years ago

That is also how all public companies are valued. Only a fraction of shares are traded on any particular day, and that is what's used to determine the market cap.

regularfry• 15 years ago

Eh, ish. If the total supply of shares is 5% of the company, they'll be worth more individually than if the whole company was up for sale. That's just supply and demand at work. If you genuimely think that the company is worth 20 million and can buy 5% of it for 1 million and stop anyone else from doing so, that's a really good deal.

shn• 15 years ago

If the offered number of shares are that low, maybe supply and demand mechanics are in play and that might result scarcity in the market and drive the price upward further in the coming days or even weeks. If they did offer that much less intentionally may be they will be able to sell other shares with higher prices slowly. What do you think, does this scenario make sense?

aheilbut2• 15 years ago

Demand Media's IPO A Hit, Stock Is Up 39%

http://articles.businessinsider.com/2011-01-26/tech/30101467...

https://www.google.com/finance?client=ob&q=NYSE:DMD

vsl2• 15 years ago

I haven't felt this strongly about shorting a stock long-term in a long time. But I don't know how long the short-term irrational exuberance is going to last - will it wipe out my investment before the stock crashes down?

I haven't seen one pro-Groupon (or general daily deals) analyses that says anything different than "it gets people in the door and generates buzz" which I think is nothing more than fuzzy PR talk since you very rarely hear of businesses that actually received long-term boosts. You read about how businesses don't benefit because mostly cheap non-returning users use Groupon deals (i.e. very few return customers) and it cheapens the businesses' full price pricing power to those who know of the Groupon (i.e. "since X was a Groupon in the past, I won't go there until there is a Groupon again").

brador• 15 years ago

Short term exhuberence or organised pump and dump? We've seen it before with the tech IPOs.

snampall• 15 years ago

It has lockup period of 180 days so that the insiders and the major shareholders can't dump the stock immediately..

http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...

ippisl• 15 years ago

One rice university study says that 70% of health spa's , yoga studios and similar businesses see repeat customers. Since it doesn't cost a yoga studio to add a person to a lesson(up to a point), customer cheapness is less an issue and maybe daily deals are a new effective way to better scale certain kind of businesses.

sunchild4• 15 years ago

Doesn't it concern you that Groupon works best for services that no one needs? I would say that in times of austerity, yoga, helicopter rides, health spas, parachuting, etc. are the first to go.

smackfu2• 15 years ago

I've been burned by this before, especially by the margin requirements for a short-sale. It doesn't matter how confident you are a stock will crash, because if it keeps going up, eventually you will either need to sell at a big loss or add more money to keep up. And it's very tempting to short even more as it continues to go up, since you'll make even more when it crashes! And then you run out of money and are screwed.

In general, it's not a good idea to start from "this stock is priced illogically" and then apply logic to it.

ScottBurson2• 15 years ago

"Markets can stay irrational longer than you can stay solvent." -- Keynes

bwhite• 15 years ago

In a couple weeks, options will be available on the stock and you can buy puts. The upside isn't as good but the downside is capped instead of unlimited.

comedian• 15 years ago

put option terms only last for 3-9 months. you can use LEAPS which are long-term option contracts with a 2+ year expiration.

ww520• 15 years ago

Wait until the lockout period for the employee options expires, like in 6 months, then short it hard. Do it like 2 months beforehand because everyone else is thinking the same thing.

JimboOmega• 15 years ago

E*Trade won't let me short it, at the moment anyway, because they say they can't borrow shares for it.

I haven't felt this strongly about a short in a long time, either.

gyardley2• 15 years ago

Of course they can't, the float is teeny.

Eventually you'll be able to buy put options, but you're going to pay a huge premium because of that float - there's a real risk the clearing firm will force your market-maker to buy stock, which has to be priced into the cost of the put.

Buying options is sort of like gambling on a sports team. When the sentiment's one-sided, the odds naturally get adjusted. You'll only make a bit of money shorting Groupon if you're right, but you'll still lose everything if you're wrong.

If you absolutely must do this, at least buy a put spread to hedge your risk at a bit.

chollida1• 15 years ago

> haven't felt this strongly about shorting a stock long-term in a long time. But I don't know how long the short-term irrational exuberance is going to last - will it wipe out my investment before the stock crashes down?

I'd be more worried about the borrowing costs killing you.

Small float, check Hedgies got their pop and exit, check Lots of short interest, check

it's going to cost you dearly to short.

igorgue• 15 years ago

BUBBLE BUBBLE BUBBLE and downvote.

vizzah• 15 years ago

Trading volume went downhill quite quickly..

pbreit2• 15 years ago

As must be the case when a stock starts trading for the very first time.

bcrescimanno• 15 years ago

I'm absolutely unsurprised that the shares were sharply up on the open; IPOs over the past decade have mostly turned into government-sanctioned (or at least ignored) "pump-and-dump" operations. One of the things I've come to despite having moved to Silicon Valley is this absolutely infantile obsession with by-the-minute stock prices.

Congrats to Groupon on their successful IPO; I still have very strong doubts that they have any means of building a successful, sustainable business. Time will tell better than my attempts at fortune-telling.

moreorless• 15 years ago

Everything points that the stock will be trading in the teens in the near future. Their financials are a joke. Their costs to acquire users are astronomical (http://adage.com/article/digital/groupon-marketing-spending-...) and their accounting is shady at best.

SODaniel2• 15 years ago

I would invest long term in groupon over my own dead body. $13 BILLION valuation for a company that took in $900 million+ and dumped 90% to founders while heavily in the red? Yeah, seems like a great investment.

SODaniel2• 15 years ago

1. IPO 50% lower then you guided 6 months ago 2. Float so few shares that you can push the value yourself with cash from previous financing round 3. ?? 4. Profit

bbest86• 15 years ago

I would put it:

1. IPO 50% lower then you guided 6 months ago 2. Float so few shares that you can push the value yourself with cash from previous financing round 3. Profit 4. ???

JacobAldridge• 15 years ago

In case you missed the link at the bottom - live stock reports. (As at this time it's almost up to $29)

https://www.google.com/finance?client=ob&q=NASDAQ:GRPN

jcfrei2• 15 years ago

I'm really inclined right now to buy put options on GRPN.

aheilbut2• 15 years ago

You can't yet.

xutopia• 15 years ago

What are the rules determining when you can? (I'm rather uneducated on markets).

jcfrei2• 15 years ago

yeah. just noticed it's not showing up on ISE

dguaraglia• 15 years ago

My biggest issue with Groupon's IPO is not the stupid gambling that's going on, but the consequence that will have in other tech stocks and investment in tech companies in general.

davidlenehan• 15 years ago

This is going to be big. I am selling all of my Bit Coins at once to invest. Out of my way suckers.

jamesbritt2• 15 years ago

I've been getting what seem to be Groupon-ish offers from both Amazon and Google. Basically discount deals for things in my area, "pay $10 for $20 worth of foo" kind of things.

I never (that I'm aware of) asked for these offers, and it seems that if both Google and Amazon are actively pushing these out to their user base that Groupon is already borked.

druiid• 15 years ago

The Amazon offerings are provided by livingsocial... just an FYI.

jamesbritt2• 15 years ago

Thanks. I've not looked closely at them, just a glance as they turn up in my mail.

hamidpalo• 15 years ago

This is very unsurprising. The majority of IPOs are underpriced and in some ways the underpricing is a measure of success.

There has been a lot of research done on the topic of underpricing for book-built IPOs (like this one). The most popular conclusion I have seen is that it's a form of compensation for the underwriters and their clients. Underwriters pick their best clients who in exchange for doing business with the firm and revealing their "proprietary information," get access to IPOs that are very underpriced.

Raising money isn't the singular objective of an IPO. What the issuer wants is the creation of a liquid market for their shares, analysts to follow said market, and to be perceived as a successful company in order to enable follow-on offerings. Raising less money in order to enable these things, especially for the creation of a liquid market and analyst following is well worth it for the issuer.

Investors want to be compensated for their research and taking on risk. Underwriters allocate shares to their best customers in exchange for their information.

This comment isn't very clear or convincing. Jay Ritter from University of Florida has a lot more information and links on all of the above: http://bear.warrington.ufl.edu/ritter/ipodata.htm and http://bear.warrington.ufl.edu/ritter/ipolink.htm.

Basically, leaving no money on the table is much costlier than having the IPO underpriced by ~50%.

Groupon is an interesting IPO, not for how much it's stock rose but for the problems in its business model. A much better indicator of how well their IPO went will be the closing prices 1, 6, and 12 months form now.

alttag• 15 years ago

Right. The downside of underpricing is that it raises less cash for the company. This was the reasoning behind Google's adoption of the "dutch auction" approach to pricing their initial shares, although their value still spiked dramatically on release.

linuxhansl• 15 years ago

We're doomed.

Groupon shares open up 40%

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