
Groupon shares open up 40% - phjohnst
http://techcrunch.com/2011/11/04/groupon-ipo-shares-pop-40-on-first-trade-debuts-at-17-8b-market-cap/
======
bcrescimanno
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
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-...](http://adage.com/article/digital/groupon-marketing-spending-
works/230777/)) and their accounting is shady at best.

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raganwald
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
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
Just tell people you're diversifying.

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peterb
"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-...](http://37signals.com/svn/posts/1941-press-
release-37signals-valuation-tops-100-billion-after-bold-vc-investment)

~~~
smackfu
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
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...](http://www.bloomberg.com/news/2011-11-03/groupon-said-to-
raise-700-million-after-pricing-its-ipo-above-price-range.html)

~~~
pitdesi
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...](http://en.wikipedia.org/wiki/History_of_Google#Financing_and_initial_public_offering)

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%

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

[http://articles.businessinsider.com/2011-01-26/tech/30101467...](http://articles.businessinsider.com/2011-01-26/tech/30101467_1_gate-
stock-guess-investors)

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

------
vsl2
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").

~~~
smackfu
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.

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

~~~
unfletch
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/>

~~~
ScottBurson
Wow. Funny how these things take on a life of their own. A _lot_ of people now
think Keynes said that.

------
hamidpalo
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
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.

------
SODaniel
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
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
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. ???

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

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dguaraglia
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.

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

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

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JacobAldridge
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)

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

~~~
aheilbut
You can't yet.

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

~~~
gyardley
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.

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vizzah
Trading volume went downhill quite quickly..

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

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linuxhansl
We're doomed.

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igorgue
BUBBLE BUBBLE BUBBLE and downvote.

