Founded in 2008, Groupon (GRPN, NASDAQ, 52 week range 7.25 – 31.14) was once called by Forbes the “fastest growing company ever.” In its first two years, it was valued at $1.35 billion and turned down a buyout offer from Google for $5 billion. It went public in November 2011 at $20 per share, a valuation of $12.7 billion and traded as high as $31.14 per share the first day, up 40 percent. It was a price never to be seen again. The shares are now trading under $8 per share, off about 75 percent from the high just 8 months ago.
Besides the basic business issues (the company continues to lose money, $103 million in first quarter 2012), competition is nipping at its heels from powerhouses like Google and Amazon, both going after the discount daily deal market. Groupon has seen traffic down 15 percent in June compared to the same month last year. Besides some accounting and SEC problems, nothing very serious.
What has been driving the down draft recently is that on June 1, approximately 600 million shares from early investors and employees, which was used for compensation and stock options, came off lock-ups and are eligible to trade freely. This has increased the float (shares free to trade) by about 90 percent. Trading volume has tripled since June 1 and the share price is off almost 30 percent.
Forbes recently published an article titled “Groupon Cubicle Talk: Did You Unload All Your Stock, or Just Enough to Pay for Lunch Today?” Zynga’s shares are experiencing the same sell-off. Some 325 million shares came off of lock-ups, and another 150 million will be free to trade on Aug. 16. This is also a fear for Facebook when its lock-ups expire.
Groupon is very popular in Hawaii mostly due to our “kamaaina rate” mentality. We look for it when we travel the Neighbor Islands, play golf, dine in restaurants, etc. It surely is better to be a recipient of the tremendous offers, some as much as 50 percent off, from Groupon than to be an employee right now trying to cash in on your stock options.
I think this is very common -- companies that appear to be successful because of a popular image can be anything but successful when their financials are analyzed.
Interesting. I love Groupon - I buy their coupons all the time! I assumed they were doing better, financially. Thanks for article.