Bloomberg News

Groupon Shares Plunge Below IPO Price 3 Weeks After Offering

November 25, 2011

(Updates share prices starting in second paragraph.)

Nov. 23 (Bloomberg) -- Groupon Inc., the largest Internet daily-deal site, plunged for a third day, falling below its initial public offering price for the first time.

The stock tumbled 16 percent to $16.96 today at the close in New York. Groupon, up 31 percent before this week, raised $700 million selling 35 million shares at $20 each on Nov. 3, the biggest IPO by a U.S. Internet company since Google Inc. first sold shares in 2004.

Groupon was dragged down this week on concern that profit margins will be squeezed by surging marketing costs and competition from rivals such as LivingSocial.com, backed by Amazon.com Inc. Signs that Europe’s credit crisis may be worsening also fueled speculation that Groupon’s international operations will suffer.

“There was a lot of skepticism to begin with about Groupon’s model, its margins, its growth rate, but now you throw on a world economy that’s very unpredictable and shaky, and I think people are doing a flight to safety again,” Stephan Paternot, founder of Actarus Funds, said in an interview with Bloomberg Television.

It also became cheaper to borrow the shares for so-called short sales, bets that pay off if a stock declines, according to Herman Leung, an analyst at Susquehanna International Group LLP in San Francisco.

Easier to Short Groupon

“It’s been impossible to borrow, and it’s been easing up a little bit,” said Leung, who has a “neutral” rating on shares of Groupon and doesn’t own any.

Groupon, based in Chicago, was buoyed in the days after its IPO because it offered a small percentage of the outstanding shares -- holding a so-called low-float IPO -- which helped drive up demand. Now investors are having second thoughts, said Howard Lindzon, chief executive officer of the online investing community StockTwits.

“We all know this was a rushed deal,” he said.

The broader stock market declined after Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, generating concern that Europe’s credit crisis is deepening.

Groupon shares have now lost 15 percent of their value since the IPO. The stock is down 46 percent from an intraday high of $31.14 on Nov. 4, its first day of trading.

--With assistance from Cory Johnson and Cris Valerio in San Francisco and Scarlet Fu in New York. Editors: Cecile Daurat, Ville Heiskanen

To contact the reporter on this story: Douglas MacMillan in New York at dmacmillan3@bloomberg.net

To contact the editors responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net; Tom Giles at tgiles5@bloomberg.net


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