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back to article Groupon shares plunge: Drain in sight

On Cyber Monday, a day when tech firms are supposed to be doing quite well, Groupon saw its shares take another tumble on the Nasdaq, landing firmly below the IPO price at $15.24. The daily deals site has seen its stock plummet in the last 10 days, dropping 41 per cent from $26.19 on 18 November, including a 9 per cent fall …

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Happy

Can I be the first to say?

Bwahahhahhhaa!

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Daily Deal

50% off your stock price.

Entirely predictable really.

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Go

groupon?

never seen anything good on there. Better off with quidco, even debenhams spends on debit cards work for better cashback than my old (now gone) egg card.

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I totally called this one!!!

It was only a matter of time before this ponzi scheme imploded under its own lack of internal support. Sadly, the people who are going to get burned by this are the consumers, the retailers (some of which foolishly went into this with eyes wide open) and small investment firms. Sadly, the moron who started this mess as well as his executive officers will obviously make out like bandits, while claiming their idea was simply ahead of its time.

I still call bullshit on Groupon and it's CEO & founder should be stripped of all financial gains made during his tenure there and have his ass thrown in jail.

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Anonymous Coward

In before...

Jokes about cheap rebates on Groupon shares.

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Too late

Beat you to it

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yet again

A bunch of bankers have pissed a load of our pension funds up the wall motivated by greed! Any halfwit could see that such sky high valuations were absolute fantasy. I can understand Apple's valuation, I can even accept that Facebook is worth a decent amount (although not 100bn), but the likes of Twitter, groupon et al, it just isn't there. There has to be a scaleable revenue stream, preferably more than one. Being popular or novel is not enough by itself. FB is finally making coin and has huge market share. I'm pretty sure I wouldn't rate it as being on a par with Ford or Intel, but surely these xxbn ipo's require at least some hint of a significant income.

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Anonymous Coward

In my opinion

.. they ought to throw the CEO in jail and keep him there until he has eaten ALL those fairy cakes.

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Investors == headless chickens

They run around putting large piles of money (usually our pension money) in harebrained schemes without understanding the business case, the product, the company, the value it has.

A bunch of second hand computers in an over priced 'data centre' which provides a bunch of 'users' a 'free' service (in return for sticking adverts all over the place) is NOT as valuable or useful as a company producing food, machinery, necessary features of life... yet investors pile money in as if they were.

These investors are of course just too busy working out where to splash their over sized bonuses - which blonde bimbo they will lunch with, what ferrari they will buy. etc etc to actually attend to their proper job. Somehow they keep their bonuses yet my pension fund, although 25 years old, is not worth the money put into it - in fact I would have been so much better off burning the money for heating that I continually warn others against buying into the whole pension fund fantasy.

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But that is the premise of managing investment funds: the manager does not need to understand what he (and it's pretty much universally a he) invests in, he simply needs to look at "the numbers". He has his metrics, most of the time he doesn't even understand how they are calculated, that's a "backroom" job, he just compares them to those of other similar investments.

Any mathematician, and about eight out of ten tech geeks, will tell you straight away that this is a recipe for being taken. Any such system open to being optomised (or gamed) to produce the results that are wanted. Especially where there are very large sums of money at stake on the one hand and penalties for failing to "maximise shareholder value" on the other. I've come across it often enough when looking at business performance metrics from a management rather than investment point of view that I'm convinced it's SOP.

Then we have the issue of what businesses are similar and comparible...

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Meh

You are underestimating Groupon...

...there is huge pent up demand for half price get-fish-to-eat-dead-skin-off-your-feet deals.

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Anonymous Coward

Socialize pensions

Take the life bloody away from bankers who can use money that isn't their's to temporary inflate stock prices so they get rich and then leave the pension holders with the hit.

We should not have any tax breaks or government help for pension funds. If they are long term investment funds then treat them no different.

It's the main problem with Capatilism at the moment.

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FAIL

The bankers who sold Groupon for $20 must have smoked the carpet!

It is only natural that Groupon's share price tumble. A week before the IPO, I had publicly warned of this and set a target price of between $8.22 and $10.25. How did I come to this number?

Well, Groupon has a rather simple business model that can be modeled as: margin x average price of product x number of products sold.

The former is about 40% and decreasing (with large differences in geographies such as China where we are talking no more than 10%). The latter can be estimated from the number of users and merchants, of which no reasonable forecast could explain the IPO price of $20 per share.

In my analysis, I pointed at the small float as a reason for the seemingly high IPO share price. I now expect another huge drop after the IPO lock-up period ends!

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Three words

Pump and dump

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