The markets for stocks behave very differently than the markets for, say, spa treatments, in large part because nobody has commoditized spa treatments. Buying a spa treatment for half off doesn't say something about the market valuing it differently today than yesterday, it says something about the spa's marginal cost of offering a treatment during an idle time slot and price discrimination.
Whereas, GRPN's price says something about market segmentation alone: The folks who bought the hype have all bought the stock and now it will trade according to the expectations of the rest of the market.
People will probably call for stricter lockup periods, but as long as investment banks and VCs are allowed to get rich flipping IPOs, this sort of thing is going to keep happening. These founders were just ruthless enough to get themselves a seat at the dinner table instead of being the servants ladling out the soup.
I bet there will be some rebound and short squeeze soon because 95% of the stocks are still not publicly traded and GRPN will do everything to keep the stock price near the IPO price for some time.
2. I expect it's (mostly) illegal for a company to manipulate their stock. One option is to buy back shares, but I doubt that's a good use for their cash at this stage.
3. Even if illegal methods were an option, how would they keep the price up?
They make a hunk of their shares available for borrowing by people who want to short the stock. Since a lot of people want to short Groupon these days, they take advantage of the stock's availability to do so - which serves as a negative indicator and drives the price down.
Once the price has been driven artificially lower by the pent-up short demand, then good or even neutral news about Groupon will panic some of the shorts, forcing them to buy to limit their losses - but since the Groupon float is so tiny (there's not that many shares out there), the panic buying will cause the price of the stock to jump sharply. That in turn panics more of the shorts, which inspires more buying, which raises the price more, which inspires more buying...
Remember, when only 5% of a company is publicly traded, the price of the stock has a lot more to do with its traders than the company. No one's trading on fundamentals here - right now people are just playing supply and demand games with the dumb money.
I could be wrong, but I predict some crazy whipsawing of the stock price in the months ahead, with the institutions who brought Groupon to market making money on the way up and on the way down.
Kind of like git being developed on git [1].
[1] - http://git.kernel.org/?p=git/git.git;a=commit;h=e83c5163316f...
Such great pyramid scheme potential right there :)
