This article is about Groupon’s position in the stock market and how investors anticipate its health for the next year or two. It focuses on short selling, which can be an easy money making move for investors—they borrow the stock from a stockbroker, sell it under their account, wait until the price goes down and rebuy it to make a profit on the difference.
However, analysts caution against “shorting” the company so soon after its recent IPO because stockbrokers can charge 90-100% to borrow its scarce stock (Groupon sold about 6% of its stake in its IPO, “one of the smallest in the past decade”1).
Maybe Groupon needs to reconsider its financials first
This article reminded me of the one we discussed in class earlier this year. I’ve since discovered that Groupon has “changed its accounting twice”1 and has a relatively high take rate (the amount Groupon shares with its merchants) compared to its competitors, in addition to their rising costs, which I discussed in an earlier blog post.
Investors are watching Groupon very closely to see how it behaves in the market. Currently, it’s being traded at a much higher rate than its competitors, but this volatile sector of the market is become increasingly unpredictable—I’m interested to see how it plays out over the next few months.
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References
1. Barr, Alistair. “Analysis: Short Sellers Wait to Bet Big against Groupon| Business| Reuters.” Reuters.com. Thomson Reuters, 14 Nov. 2011. Web. 17 Nov. 2011. <http://ca.reuters.com/article/businessNews/idCATRE7AD2E820111114?sp=true>.