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Why Groupon Shares Sank

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of daily-deal specialist Groupon (Nasdaq: GRPN  ) were getting clipped by investors today, finishing the day down 8.7% on news that CEO Andrew Mason, who had been under fire, will stay at the company.

So what:  Shares of the coupon merchant had jumped nearly 20% in the last week in part on rumors that Mason would be ousted, but the board made no such moves at a meeting last night. Groupon has been one of the biggest flops on Wall Street this year, as shares have fallen about 80% since their debut last November.

Now what: Sorry, but investors should be blaming themselves or the Wall Street machine that originally valued Groupon at $15 billion, not Mason. The young CEO built the company into a juggernaut in just three short years, and if anyone has the vision to give Groupon profitable legs, it's him.

Still, it's going to be an uphill battle. The daily-deals business was well timed for the recession, but there are a litany of problems with the industry, including low barriers to entry, merchant frustration, and consumer fatigue. Witness the recent layoffs at Living Social as proof that the industry was simply bloated. Groupon's still the favorite here, but I wouldn't get on board until I saw long-term growth and stable profits.

To learn about Groupon's prospects, pick up a copy of our new premium research report all about the deals slinger. This is an in-depth 2,000-word analysis that will present you with a detailed look at Groupon's opportunities and risks, as well as key items to look for in the near future. Just click right here to get access to this valuable insight today. 

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  • Report this Comment On December 01, 2012, at 4:11 AM, biztexter wrote:

    I agree the real problem is not Groupon but the fact that most small businesses don't have the right technology for effective followup marketing. They sometimes attempt to use email but 80% of marketing emails go unopened.

    The best solution out there for these companies is Business Texter. It has all the great things the big email systems have and more. What makes it so effective is 97% of sms text messages are opened. There are 5 times more people using texting than are on Facebook.

    A small business armed with an automatic followup system that also acts as the new form of customer service communications is not going to have the problem of not reactivating Grouponers again and again over time.

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10/25/2016 4:00 PM
GRPN $5.32 Up +0.15 +2.90%
Groupon CAPS Rating: *