7 ms·

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 -

by 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.
- sunchild 15y 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.
  - pbreit 15y ago
    > Doesn't it concern you that Groupon works best for services that no one needs? Even if that were the case, not in the slightest. Massive businesses are built on items that you or someone do not perceive to be needed. But Groupon also works in austere times both because people are looking for deals and businesses are looking for inexpensive or free marketing.
    - sunchild 15y ago
      50% of proceeds is not cheap for businesses. Discounts off MSRP is often not a bargain for consumers.
    - alttab 15y ago
      A large portion of the US economy is based on consumerism, of which many would agree is completely unnecessary
  - deleted 15y ago
    [deleted]
  - raganwald 15y ago
    First, I agree that this is an insightful observation, and it certainly applies to conventional suppliers. For example, if demand for yoga classes drops, the demand for professional-grade yoga mats will drop. But a businesses like an advertising agency or coupon distributor is not a conventional supplier: It exists to create demand for things people don’t think they need. In times of austerity, it’s true that “organic” demand drops. But that can increase demand for businesses that create demand out of thin air. When the class is full, nobody needs to distribute a coupon. But when the class is half-empty... Perhaps Groupon will get the call. Perhaps. I am not endorsing Groupon, just trying to point out that since they aren’t a yoga business or a conventional supplier to a yoga business but a business that throws a lifeline to a yoga business, their economics may not exactly track yoga business economics.
smackfu 15y 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.
- bwhite 15y 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.
- ScottBurson 15y ago
  "Markets can stay irrational longer than you can stay solvent." -- Keynes
  - unfletch 15y ago
    I agree with the sentiment, but the quote is misattributed. It was probably first said by Gary Shilling, a writer for Forbes, in 1993: http://quoteinvestigator.com/2011/08/09/remain-solvent/ http://quoteinvestigator.com/2011/08/09/remain-solvent/
    - ScottBurson 15y ago
      Wow. Funny how these things take on a life of their own. A lot of people now think Keynes said that.
- comedian 15y 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 15y ago
JimboOmega 15y 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.
- gyardley 15y 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 15y 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.

by vsl2 15y ago

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.

sunchild 15y 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.
- pbreit 15y ago
  > Doesn't it concern you that Groupon works best for services that no one needs? Even if that were the case, not in the slightest. Massive businesses are built on items that you or someone do not perceive to be needed. But Groupon also works in austere times both because people are looking for deals and businesses are looking for inexpensive or free marketing.
  - sunchild 15y ago
    50% of proceeds is not cheap for businesses. Discounts off MSRP is often not a bargain for consumers.
  - alttab 15y ago
    A large portion of the US economy is based on consumerism, of which many would agree is completely unnecessary
- deleted 15y ago
  [deleted]
- raganwald 15y ago
  First, I agree that this is an insightful observation, and it certainly applies to conventional suppliers. For example, if demand for yoga classes drops, the demand for professional-grade yoga mats will drop. But a businesses like an advertising agency or coupon distributor is not a conventional supplier: It exists to create demand for things people don’t think they need. In times of austerity, it’s true that “organic” demand drops. But that can increase demand for businesses that create demand out of thin air. When the class is full, nobody needs to distribute a coupon. But when the class is half-empty... Perhaps Groupon will get the call. Perhaps. I am not endorsing Groupon, just trying to point out that since they aren’t a yoga business or a conventional supplier to a yoga business but a business that throws a lifeline to a yoga business, their economics may not exactly track yoga business economics.

smackfu 15y 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.

bwhite 15y 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.
ScottBurson 15y ago
"Markets can stay irrational longer than you can stay solvent." -- Keynes
- unfletch 15y ago
  I agree with the sentiment, but the quote is misattributed. It was probably first said by Gary Shilling, a writer for Forbes, in 1993: http://quoteinvestigator.com/2011/08/09/remain-solvent/ http://quoteinvestigator.com/2011/08/09/remain-solvent/
  - ScottBurson 15y ago
    Wow. Funny how these things take on a life of their own. A lot of people now think Keynes said that.
comedian 15y 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 15y ago

JimboOmega 15y 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.

gyardley 15y 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 15y 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.