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.
...
Crickets.
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.
This reminds me of Jason Fried's prank that 37 Signals valuation tops $100B! http://37signals.com/svn/posts/1941-press-release-37signals-...
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://articles.businessinsider.com/2011-01-26/tech/30101467...
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").
In general, it's not a good idea to start from "this stock is priced illogically" and then apply logic to it.
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.
I haven't felt this strongly about a short in a long time, either.
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.
http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...
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.
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. ???
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.
