Groupon Shares Plunge, Trading Close to IPO | Hacker News Reader

Groupon Shares Plunge, Trading Close to IPO

bloomberg.com

50 pointsrgarcia34 comments

As an indicator, my short position was closed out on Monday by my broker -- they couldn't find shares to borrow anymore.

How does that work? When you short, you immediately sell the shares you borrowed. Why aren't those shares available to be re-borrowed from the new owner? The only reason I can guess is that the new owner isn't connected to the liquidity system, which I would guess would have been a solved problem by now.

http://www.sec.gov/rules/final/2009/34-60388.pdf

Might be time to go long then.

Was this really a surprise for anyone? The IPO has been a trainwreck since Groupon decided to start making up financial metrics.

If Groupon could cut costs by using a self-serve model (rather than 1000s of sales staff) it could drastically cut costs and potentially make a large profit.

Surely at some point in the next few years they will be well known enough for businesses to go to them, instead of the other way around?

That assumes that Groupon is actually beneficial to the business that does one.

They also need to manage the "coolness" and variety of offers and write snarky copy, so self-serve wouldn't necessarily bring it to break-even.

In the long term they do need to be beneficial to the businesses that do it, otherwise they'll die in a few years from word of mouth.

Who writes the copy is an issue, though just someone writing that would be cheap compared to chasing tons of businesses looking for work and talking to them all.

The best bet is that they will die in a few years. The fundamental flaws with their business can't be solved with self-serve.

It's not impossible to survive off the efforts of a predatory sales force without actually benefitting your customers, but small local businesses aren't the best prey and you have to actually be able to profit off it it. If you can spend that much money on salesmen, you're better off making enterprise software than social coupons.

"The so-called borrow rate, or fee imposed by brokers on traders who want to sell short, has dropped to about 30 percent from 99 percent earlier in the month, Leung said. At 30 percent, Groupon’s shares would have to decline by at least that much before the trader makes a profit."

I must be missing something...

When I buy shares, I don't get to inform the broker that the stock needs to go up by 30% before they can execute my trade at today's price.

Betting on a stock to dip 5% seems like a big enough risk that I should be able to make money on it. 30% just sounds crazy.

> I must be missing something..

When you borrow shares to short, the person you are borrowing them from (usually a broker) specifies a fee. Your quote from the article is saying that the fee is 30% (which is friggen huge, but is part of the manipulation that occurs with a hot IPO.)

How could the fee be 99%? Doesn't that imply that anyone who takes the short is damn sure that the stock will be worth $0?

99% is an the annualized rate. There have been a few stocks with > 100% borrow rate. It implies most of the shorters don't expect to hold for a year (or don't realize the costs.)

many people have made heaps of money these past days shorting grpn. let's wait and see what happens by the time the 180 day lock-up expires.

the risk with shorting grpn today is the small free-float given that it's easy to create demand with small amounts of capital. it's a no brainer that when the lock-up expires this stock will fall like a brick.

If it's a no-brainer, why aren't short sellers flooding the market and driving down the price to the post-lockup price?

there is a limited amount of free-float which you can borrow against. the counter-party needs to purchase that stock, and if a large number of investors want to short sell the stock, they are indirectly increasing the demand. a good example is how hedge funds lost eur30bn back in 2008 trying to short sell overvalued volkswagen stock. i.e. Porsche selling part of its VW stake to ease a short-squeeze

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I really wanted to short this ticker during the IPO, but I was worried that I would have had to pay dividends that would go over my budget and I'd have to give up the positions before they were profitable, or that I'd accidently get futures instead of options (and potentially lose an arbitrary amount of money overnight). Does anyone know how one could have gone about shorting this in a way that made money with a budget of say $2500, (i.e., in a way that would have incurred a maximum loss of $2500) given what happened?

Buy $2500 worth of puts. You would have large upside and could lose at most what you paid or the put. Of course, The time decay works against you, but that wouldn't matter given the swings you're expecting.

It would be highly unlikely for Groupon to issue a dividend, but shorting does have risks you need to educate yourself on if you are going to attempt it. I have a feeling options particularly put options would be priced highly at this time so a better choice could be to do a bearish call spread. http://www.optionsxpress.com/free_education/strategies/bear_...

Buy put options.

No, you sell someone else's shares immediately and promise to buy them back to replace them in the future. You're right that it's basically an IOU, but you got the order backwards.

Hmm I haven't seen them "plunge". I saw Them spike out the gate and gradually tail down. Which is pretty much what I expected.

13-14% drop today. That's quite a bit.

Why so much of a drop today? Has any news come out recently besides the fuzzy numbers and growing competition?

It wasn't so much of a question of why, but when. I don't think any sane person expected Groupon to stay up there.

Markets don't act rationally day to day. In fact, many think that markets are only rational at spot moments and that irrationality is their default state.

Isn't it still up from where it started?

not really. it wen't public at 26+$/share. only if you had put an order (as an institutional investor, prior to going public i.e. traded) you would of been able to get in at $20/share.

Yes, about 2-3% above $20, the stated IPO.

Most 2011 tech IPOs are unhappy today. The market is volatile and bearish. In the absence of news, you can't interpret stuff like this --- especially given the fact that Groupon doesn't have a listed competitor --- without understanding where the whole market is at.

that is no explanation: - investors do not consider Groupon a tech company (it's all over the research reports) - Google, Intel are down marginally (non retail), Apple is up (tech retail). Nasdaq is ONLY 0.07% down. - Falling 14% is intrinsic to the stock, not the market.

Google, Intel, and Apple aren't unproven '11 IPOs. Look at Pandora, Zipcar, etc.

I was making a point regarding tech. Groupon is not a technology stock, it didn't market itself as a tech company. I don't understand how on the one side you say "Groupon doesn't have a listed competitor" but you want to compare it to "unproven '11 IPOs. Look at Pandora, Zipcar, etc.". It all sounds to 1+1=5...

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