5 ms·

Groupon shares open up 40%

54 points by phjohnst 15y ago

raganwald 15y 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 15y 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 15y ago
    Just tell people you're diversifying.
  - sunchild 15y 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 15y 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-valuation-tops-100-billion-after-bold-vc-investment http://37signals.com/svn/posts/1941-press-release-37signals-...
- smackfu 15y 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.
  - wavephorm 15y 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.
  - jsm386 15y 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-raise-700-million-after-pricing-its-ipo-above-price-range.html http://www.bloomberg.com/news/2011-11-03/groupon-said-to-rai...
    - pitdesi 15y ago
      It isn't quite common, but many of the internet darlings did this same thing. I don't know why it is news all of a sudden. While GRPN has the smallest float, there were many other companies in the ballpark (P, LNKD, GOOG, etc). A more general rule of thumb for IPO's is 20-25%, but all of these guys had single digit values. It is fairly smart move on their part. They get a higher valuation due to demand and supply, and a long as all of the investors/employees don't flood the market with their shares, the early investors/employees win. Recall Google: http://en.wikipedia.org/wiki/History_of_Google#Financing_and_initial_public_offering http://en.wikipedia.org/wiki/History_of_Google#Financing_and... They floated 14m out of 271m total shares, and other stockholders added another 5m or so... so the total amount it IPO'd for was around 7% of the company but GOOG's share was roughly 5%
deleted 15y ago
[deleted]
aheilbut 15y ago
Demand Media's IPO A Hit, Stock Is Up 39% http://articles.businessinsider.com/2011-01-26/tech/30101467_1_gate-stock-guess-investors http://articles.businessinsider.com/2011-01-26/tech/30101467... https://www.google.com/finance?client=ob&q=NYSE:DMD https://www.google.com/finance?client=ob&q=NYSE:DMD
vsl2 15y 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 15y ago
  Short term exhuberence or organised pump and dump? We've seen it before with the tech IPOs.
  - snampall 15y 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/1490281/000104746911008921/a2206109zex-1_1.htm http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...
    - gojomo 15y ago
      So let's check back on May 2, 2012!
- ippisl 15y 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.
  - 15y ago
igorgue 15y ago
BUBBLE BUBBLE BUBBLE and downvote.
vizzah 15y ago
Trading volume went downhill quite quickly..
- pbreit 15y ago
  As must be the case when a stock starts trading for the very first time.
bcrescimanno 15y 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 15y 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-works/230777/ http://adage.com/article/digital/groupon-marketing-spending-...) and their accounting is shady at best.
SODaniel 15y 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.
SODaniel 15y 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 15y 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 15y 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 https://www.google.com/finance?client=ob&q=NASDAQ:GRPN
jcfrei 15y ago
I'm really inclined right now to buy put options on GRPN.
- aheilbut 15y ago
  You can't yet.
  - xutopia 15y ago
    What are the rules determining when you can? (I'm rather uneducated on markets).
    - gyardley 15y ago
      I don't know the exact rules, but it usually takes a couple weeks for the OCC to register the options with the CFTC. Then trading can begin. So, mid-Novemberish. With such a small float, put-call parity isn't going to exist - the cost of borrowing the stock is going to make buying puts pretty pricey. I feel sorry for the people who bought puts on LNKD, which also had a tiny float.
  - jcfrei 15y ago
    yeah. just noticed it's not showing up on ISE
dguaraglia 15y 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 15y ago
This is going to be big. I am selling all of my Bit Coins at once to invest. Out of my way suckers.
jamesbritt 15y 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 15y ago
  The Amazon offerings are provided by livingsocial... just an FYI.
  - jamesbritt 15y ago
    Thanks. I've not looked closely at them, just a glance as they turn up in my mail.
hamidpalo 15y 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 http://bear.warrington.ufl.edu/ritter/ipodata.htm and http://bear.warrington.ufl.edu/ritter/ipolink.htm 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 15y 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 15y ago
We're doomed.

54 points by phjohnst 15y 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 15y 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 15y ago
  Just tell people you're diversifying.
- sunchild 15y 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 15y 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-valuation-tops-100-billion-after-bold-vc-investment http://37signals.com/svn/posts/1941-press-release-37signals-...

smackfu 15y 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.
- wavephorm 15y 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.
- jsm386 15y 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-raise-700-million-after-pricing-its-ipo-above-price-range.html http://www.bloomberg.com/news/2011-11-03/groupon-said-to-rai...
  - pitdesi 15y ago
    It isn't quite common, but many of the internet darlings did this same thing. I don't know why it is news all of a sudden. While GRPN has the smallest float, there were many other companies in the ballpark (P, LNKD, GOOG, etc). A more general rule of thumb for IPO's is 20-25%, but all of these guys had single digit values. It is fairly smart move on their part. They get a higher valuation due to demand and supply, and a long as all of the investors/employees don't flood the market with their shares, the early investors/employees win. Recall Google: http://en.wikipedia.org/wiki/History_of_Google#Financing_and_initial_public_offering http://en.wikipedia.org/wiki/History_of_Google#Financing_and... They floated 14m out of 271m total shares, and other stockholders added another 5m or so... so the total amount it IPO'd for was around 7% of the company but GOOG's share was roughly 5%

deleted 15y ago

[deleted]

aheilbut 15y ago

Demand Media's IPO A Hit, Stock Is Up 39% http://articles.businessinsider.com/2011-01-26/tech/30101467_1_gate-stock-guess-investors http://articles.businessinsider.com/2011-01-26/tech/30101467... https://www.google.com/finance?client=ob&q=NYSE:DMD https://www.google.com/finance?client=ob&q=NYSE:DMD

vsl2 15y 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 15y ago
Short term exhuberence or organised pump and dump? We've seen it before with the tech IPOs.
- snampall 15y 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/1490281/000104746911008921/a2206109zex-1_1.htm http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...
  - gojomo 15y ago
    So let's check back on May 2, 2012!
ippisl 15y 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.
- 15y ago

igorgue 15y ago

BUBBLE BUBBLE BUBBLE and downvote.

vizzah 15y ago

Trading volume went downhill quite quickly..

pbreit 15y ago
As must be the case when a stock starts trading for the very first time.

bcrescimanno 15y 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 15y 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-works/230777/ http://adage.com/article/digital/groupon-marketing-spending-...) and their accounting is shady at best.

SODaniel 15y 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.

SODaniel 15y 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 15y 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 15y 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 https://www.google.com/finance?client=ob&q=NASDAQ:GRPN

jcfrei 15y ago

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

aheilbut 15y ago
You can't yet.
- xutopia 15y ago
  What are the rules determining when you can? (I'm rather uneducated on markets).
  - gyardley 15y ago
    I don't know the exact rules, but it usually takes a couple weeks for the OCC to register the options with the CFTC. Then trading can begin. So, mid-Novemberish. With such a small float, put-call parity isn't going to exist - the cost of borrowing the stock is going to make buying puts pretty pricey. I feel sorry for the people who bought puts on LNKD, which also had a tiny float.
- jcfrei 15y ago
  yeah. just noticed it's not showing up on ISE

dguaraglia 15y 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 15y ago

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

jamesbritt 15y 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 15y ago
The Amazon offerings are provided by livingsocial... just an FYI.
- jamesbritt 15y ago
  Thanks. I've not looked closely at them, just a glance as they turn up in my mail.

hamidpalo 15y 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 http://bear.warrington.ufl.edu/ritter/ipodata.htm and http://bear.warrington.ufl.edu/ritter/ipolink.htm 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 15y 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 15y ago

We're doomed.