Not going to make any predictions for the future here...but whether this should be characterized as a crash or not (at the present moment a decline from 24.5 to 18 over two days, about 27%) is a semantic question and open for discussion.<p>This is actually a very interesting question. Keeping the specifics of Groupon's business out of the equation at the moment, the pricing of growth companies is an incredibly inexact science. If most of these companies were publicly traded and liquid, you'd expect fluctuations of at least 30% a day during volatile periods. Just imagine the atmosphere in an average startup: One day you're going to conquer the world, the next day you're doomed...depending on prevailing conditions and random issues that pop up. This "atmosphere" (or expectation) carries over to the people who are attempting to determine the market value of your company. That's what the stock market is trying to: from moment to moment, determine the exact market value of each company.<p>The market still hasn't mastered pricing stocks like these (and it probably never will, potentially extreme growth stocks like technology startups practically by definition have huge volatility), but it is getting better. Look at the skeptics who try to price startups on revenue/profits alone. Obviously a bunch of really smart people in a garage with a sound plan but no revenues are worth more than $0. Some of these groups are bound to strike it rich, so average across all of them and you'll get a positive (perhaps very large) number. This is why we see large valuations of early-stage startups. But how large should the number be? The exact value of a company is the present-value adjusted worth of all its future profits. Determining this number is what everyone who does value-based investing attempts to do.<p>But finding this number is impossible, especially if you're investing in a very young company. I think that a lot of tech investors today are attempting to average the value across a large number of promising companies, instead of looking too much at the specifics of a single one.<p>Due to the inherent volatility, investing in potentially extreme growth companies like Groupon and LinkedIn is a _hugely_ risky business, unless you happen to be a genius who sees something about their business that no one else does. There were probably geeks who made these kinds of observations about Google in its early history.
The insiders are 144 days into their lockup period of 180 days according to the S1 filing. Morgan Stanley and their preferred clients have made their money and are moving on. So there's not much motivation among heavyweights to keep marketing the stock and there is some paranoia about the looming lock-up expiration.<p><a href="http://www.sec.gov/Archives/edgar/data/1490281/000104746911005613/a2203913zs-1.htm" rel="nofollow">http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...</a>
Graphs show that the drop started on Monday morning. On Friday afternoon a piece of news appeared that LivingSocial is about to raise a $200M round to strengthen its position as a competitor for Groupon. More recent rumours say that the round may actually be much higher than that, backed by some big names, and the cash would go to the company and not to investors (<a href="http://blogs.wsj.com/venturecapital/2011/11/22/livingsocial-waiting-on-more-big-shoes-to-drop-to-close-round/" rel="nofollow">http://blogs.wsj.com/venturecapital/2011/11/22/livingsocial-...</a>). So this may have influenced investors mood to some degree, maybe enough to make a spark so to speak, which probably was the opportunity that short sellers were expecting to start making big bets. It's just an assumption, but it could make sense.<p>According to an earlier Reuters analysis, Groupon shares are very attractive for shorting because the company is losing money, had issues with accounting, unproven business model, and may face stiff competition (<a href="http://www.reuters.com/article/2011/11/14/us-groupon-shortsellers-idUSTRE7AD2E820111114" rel="nofollow">http://www.reuters.com/article/2011/11/14/us-groupon-shortse...</a>).
groupon is a pseudo ponzi scheme. For any market X there exists a high variability for profitable, volume adjusted, daily deals (resource {R}), which people want. After time t, the most desired deals r in resource R are exhausted, leaving behind lesser deals (deals which make substantially less revenue-share). So as t >> T, only less desired deals remain for market X, hugely eroding profits margins, given the high fixed cost to set the deal. So the only way to maintain margins is to enter a new market Y, where r (very profitable daily deals) is in high supply. But eventually this market will be exhausted of r, and margins will again collapse. Therefore Groupon must continually enter new markets to maintain margins, which it has been doing. But there are only a finite number of markets. So eventually Groupon will collapse. This is an intrinsic problem of the daily deals market. Google may overcome it, if it can implement it's near field communication strategy, or automate the bidding process. But other daily deals site, like Living Social, with high employee counts, are bound to fail.
I have a question.<p>Since the coupon magic/mania started (everybody and their dog is doing a coupon site). Has there appeared a site/service that disrupts this whole model?<p>What I mean is - the Service Providers are getting really a shitty value out of GRPN other daily deal sites. Initially GRPN needed loads of cash to get their sales people on the streets and logistics behind this were pretty massive.<p>But today, I see this market as completely commoditized. Everybody and his dog knows of the daily deal sites. Lately I haven't really met anybody who is doing some kind of services who doesn't know of daily deal sites (and I'm from Slovenia).<p>So here is my question - is there a sort of service that would take a one time fee/subscription for service providers and let them run their own daily deals.<p>This way you cut out the middleman and the (expensive) sales people and this would even offer sufficient value to the service providers.
Insider trading motives aside, this fall in stock price coincides with a general trend I'm seeing in this daily deal market. As a merchant whose had lots of success with these sites, the offers have become better and better over the past few months. Our first Groupon ever was a 50/50 split. Our last deal was 80/20. They offered 70/30, we asked for more, we got it. Maybe that's a sign that their costs have gown down so they have more room to play with.<p>Personally, I reached deal fatigue and unsubscribed from all of the sites. How many times can you possibly eat out / get a message / get your car detailed?
The IPO never made any sense for an unprofitable company like Groupon. Seems like the early investors just wanted any exit they could get before the ship sank, like a ponzi scheme.
Epic Groupon poem, especially for those who do not understand why this is price action is happening!<p><a href="http://www.thereformedbroker.com/2011/10/30/groupoem/" rel="nofollow">http://www.thereformedbroker.com/2011/10/30/groupoem/</a><p>Here are the first three verses as a teaser:<p><i>Gather round, dear investors, and hear all about<p>The worst IPO that has ever come out<p>It's hitting this week if the stars align right<p>But only the foolish would look for a bite<p>---<p>For Groupon is now past the peak of its glory<p>Its promising start a well-known story<p>Of youthful intensity, vision and zeal<p>Of crafting the perfect consumer-led deal<p>---<p>City by city, Groupon grew like a weed<p>Positioned as marketing for the small biz in need<p>Coupons for shoes and coupons for socks<p>Offers for Lasik and half-off on Crocs</i>
How did anyone ever expect to make money off of a coupon company?! News media provided a spin campaign to inflate Groupon's value and everyone flocked to it like white on rice... We haven't learned anything since the real estate bubble popped. The investing masses are 85% sheep.
Here's a dynamic graph that shows GRPN's price since IPO:
<a href="https://www.google.com/finance?client=ob&q=NASDAQ:GRPN" rel="nofollow">https://www.google.com/finance?client=ob&q=NASDAQ:GRPN</a>
I was surprised to find out that the cost to borrow shares (to short) was still so high. Doesn't that pretty much guarantee that the share price is somewhat above the "fair price"? The cost to borrow is like a tax. The price consumers pay is always above the equilibrium price, which is above the price the sellers get (30% below the buyer price).<p>What about derivatives? Are there calls and puts on Groupon?
I think it's interesting Groupon is giving all these large tech companies a ton of leverage with their future deals.<p>I can just hear the Google people in their next pitch meeting to some great start-up, "You don't want to end up like Groupon do you?"
This is exactly what I expected. I firmly believe Groupon's business model(daily deals) is not a sustainable model, because it's not actually creating any real value but only destroying margin.
Although GRPN is undoubtedly a money-burning scam of a company that is doomed to inevitable failure, it should be noted that the broader market is currently suffering from sovereign debt contagion in Europe and the associated liquidity scrambles. It's not <i>only</i> GRPN.
i remember jason fried was having a conversation here on HN about why early investors decided to sell some part of their shares at the time of ipo , trying to say it was a normal thing to do<p>havent noticed any posts or comments from him in this thread though , kind of tells it ...<p>is he still hanging in here