Groupon’s Stock Discounted Below IPO Price

Nov 23, 2011 1:06pm
gty groupon ll 111123 wblog Groupons Stock Discounted Below IPO Price

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Much like the deals on its website, Groupon’s stock is selling at a discount. The shares have plunged about 30 percent in the past two days to below its offer price.

On Tuesday, the shares closed down 15 percent to $20.07, slightly above the $20 from the initial public offering on Nov. 4. Today the stock slid to $19.04 at the open then plunged another 14 percent to $17.21 at mid-day.

Analysts say the company may have been overvalued. With its IPO price at $20 a share, the Chicago-based company was initially valued at $12.7 billion. At the end of the day on Nov. 4, the company had a market cap of $16.5 billion.

Ken Sena, director in the equity research group of Evercore Partners, had valued the shares at $8-$10 billion before the IPO, even with bullish assumptions.

A spokeswoman for Groupon said the company could not comment because it is in a 40-day “quiet period” in accordance with SEC rules following an IPO.

Analysts had warned that Groupon’s business model was rapidly being replicated by fierce competitors like fellow deals website, LivingSocial.

Some merchants have said they have lost money through deal sites like Groupon while others have used them as marketing tools to attract new customers.  Merchants have complained that the new customers from Groupon can disrupt their business and aren’t very loyal.

Groupon says it has over 50 million subscribers and has sold over 22 million Groupons in North America, as of January 2011.  The company launched in November 2008 and has never made a profit.

 

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