We told you last week Groupon (Nasdaq: GRPN) was headed for a fall. Well, here the daily online deals company is, back trading at its IPO price less than three weeks after the most profitable debut for a technology stock since Google (Nasdaq: GOOG).
Shares of Groupon fell nearly 15 percent today to return to their original IPO price of $20 a share. The tech stock had climbed as high as $31.14 share during an initial public offering in which it raised $700 million – highest for a tech stock since Google hit the market in 2004.
But reality has now set in for a company that has never been profitable. Its stellar debut was more a product of an extremely small share float than anything substantive. In truth, Groupon was wildly overvalued.
And it still is. Profitability may again prove elusive this quarter with Groupon’s marketing costs surging and increased competition from LivingSocial.com, a rival daily deals site with backing from Amazon (Nasdaq: AMZN). Renewed concern about another dot-com bubble also hasn’t helped Groupon’s case.
Morningstar analyst Rick Summer thinks that Groupon is worth closer to $8 a share. StockTwits CEO Howard Lindzon told Bloomberg that the Groupon IPO was a “rushed deal.”
As we noted last week in this space, Groupon’s post-IPO honeymoon was unsustainable. The company manipulated the IPO process to earn a market capitalization it didn’t deserve.
Now it’s paying the price. Or, more literally, investors aren't.