Why Groupon Shares Popped

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 merchant Groupon (NASDAQ: GRPN  ) were flying off the shelves today, climbing as much as 25%, on an essentially unexplained buying spree. Bloomberg reported the jump may have been a result of speculation of a buyout from Google (NASDAQ: GOOG  ) .

So what: In what could be a short squeeze, meaning shorts have rushed to cover their positions, there have been two high-volume spikes in Groupon shares today. The first sent the stock up about 5% around 11 AM, and the second pushed it up 7% between 2:10 and 2:15 PM. Meanwhile, the stock has added smaller gains throughout the day. Options trading has also been especially heavy today, with more than 4,000 $4.50 December calls trading hands.

Now what: Today's rally seems mostly driven by day traders looking to make a quick buck on one of the more volatile stocks in the market. Shares of Groupon had bottomed out a month ago, at $2.60, after another poor earnings report, but have battled back since then as a potential value play and on rumors that CEO Andrew Mason would be forced out. For long-term investors, today's events should be ignored, because they are not representative of any change in the company's expected performance.

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