Decline of Groupon Shares: Predictable or Unforeseen?

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Groupon made its initial public offering earlier this month quite successfully: investors could not get enough if its stock. Groupon shares were so popular that its stock surged as much as 50 percent in its very first day of trade. This Wednesday, however, Groupon’s stock slipped. Now its price is sinking below the company’s initial offering of $20. Groupon’s shares declined 14.2 percent to $17.22 on Nasdaq. The overall decline accounts for 34 percent.

Some analysts say that this negative momentum is likely to continue until Groupon has something positive about its company. One of the reasons Groupon’s stock plunged so much was LivingSocial, Groupon’s biggest competitor. LivingSocial, which is partially owned by Amazon.com, announced on Monday that it will offer more than 20 great deals with national companies specifically for Black Friday. The national deals can bring in lots of new interested customers. However, these types of deals also put a lot of pressure on profit margins.

Another reason, that could have contributed to Groupon’s stock decline, was how easy it was to short, or bet, against the company. During the first week of Groupon’s public offering, there was little stock available for short sellers (who have to borrow shares before they are able to actually sell them.) It was a different story this week.

Some of the analyst’s say that Groupon’s offering was very high to begin with. Accordig these analysts, after all, it is not surprising how quickly Groupon’s stock decline is happening.