Is Groupon STILL EXPLODING?
When you hear about a company experiencing a “death spiral,” out-dated technology names like Research in Motion (NASDAQ:RIMM), Best Buy Co. (NYSE:BBY) and RadioShack Corp. (NYSE:RSH) often come to mind. These companies failed to innovate and keep up with the changing consumer landscape. However, there is a relatively new and well-known internet company experiencing its own free fall.
On Wednesday, Groupon Inc. (NASDAQ:GRPN), the hottest thing to hit coupons since the Sunday paper, fell more than 5 percent to as low as $7.72, making a fresh all-time low. Groupon features a daily deal on the best stuff to do, see, eat, and buy in at least 48 countries. The deals range from restaurants and vacations to half-off pest control. Although the internet coupon king has been trading on the Nasdaq for less than a year, investors have seen almost nothing but a sea of red.
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Groupon was launched in late 2008 and went public last November. The initial public offering price came in at $20, but shares climbed as high as $31.14 on their first day of trading. That price still stands as Groupon’s all-time high. As the chart below shows, Groupon shares have been getting clipped by investors ever since going public.
The stock showed brief signs of life early in the year, as it rose to nearly reach $25. However, the bounce was short-lived and shares are now down more than 60 percent year-to-date. In addition to accounting problems and SEC inquiries, the company has been losing a significant amount of money. As Business Insider points out, “In the first three months of this year, it had a net loss of $103 million. (For all of 2010, its loss was $414 million.) What is it spending money on? Well, $180 million was spent on online advertising in the first three months of the year. It’s also paying 7,000 employees, which isn’t cheap.”
While other tech IPOs such as Facebook (NASDAQ:FB) have also been hit hard, at least it has a competitive advantage with high barriers to entry. There are not too many companies that can compel more than 900 million users to sign up for services. On the other hand, many companies such as Amazon.com Inc. (NASDAQ:AMZN) and Google Inc. (NASDAQ:GOOG) are taking a stab at the discount daily deal market. Growing competition is taking a toll on Groupon’s traffic. ComScore, a leader in measuring several aspects of the digital world, recently released a note to its clients that said traffic at Groupon fell 15 percent in June, compared to the same month a year earlier, according to CNBC.
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