Groupon's (Nasdaq: GRPN) stock is crashing only 20 days after the IPO boldly stepped out into the volatile marketplace. All eyes watched as the company defied expectations and traded at a profit for weeks, but alas, initial concerns may have been justified after all.
Since its debut on November 4th, the stock has traded comfortably above the $20 IPO price. That was until yesterday, when the stock fell over 10% and as of 12:00 today (Nov. 23) it has dropped more than 14.95% down to $17.11 per share.
So what happened? According to Henry Blodget, CEO and Editor-in-Chief of Business Insider it's anyone's guess. "It could be that some investors are hearing bad news about Q4. It could be that the underwriters have stopped aggressively supporting the price. It could be the broader market. Or all of the above. The bottom line is that folks aren't willing to pay as much for the stock as they were a few days ago."
At the same time, he notes, the company is transitioning from hyper-growth to profitable growth, a change that usually takes a toll on stock prices. "In my opinion, the IPO price was too high to account for that."
IPO market
The company entered the market after an extended period of zero IPO releases and poor results for those that had been released. Groupon's release and performance therefore drew a lot of attention.
Investors, venture capital firms, and tech startups viewed the company as a bellwether of future public offerings. Other IPOs-in-waiting followed the performance for signals it was safe to follow suit and enter the market.
Time will tell if Groupon will be trading steady at new and lower levels, if it will crash further, or if it will rebound.
Investing ideas
So, which other IPOs are in trouble?
To help you explore this topic, we collected data on the 200 most recent IPO filings. We collected data on institutional money flows and short trends, and identified the names that have seen significant smart money selling and bearish sentiment from short-sellers.
Sophisticated investors, like hedge funds and short-sellers, seem to think these recent listings are in trouble -- do you agree?
List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Eben Esterhuizen, CFA:
1. Demand Media (NYSE: DMD): Operates as a content and social media company in the United States. IPO occurred on 26-Jan-2011. Net institutional sales in the current quarter at -1.9M shares, which represents about 5.95% of the company's float of 31.93M shares. Shares shorted have increased from 1.32M to 1.70M over the last month, an increase that represents about 1.19% of the company's float of 31.93M shares.
2. LinkedIn Corporation Class A (Nasdaq: LNKD) : Operates an online professional network. IPO occurred on 19-May-2011. Net institutional sales in the current quarter at -832.2K shares, which represents about 8.54% of the company's float of 9.74M shares. Shares shorted have increased from 2.88M to 3.27M over the last month, an increase that represents about 4.% of the company's float of 9.74M shares.
3. Pacira Pharmaceuticals (Nasdaq: PCRX): Engages in the development, commercialization, and manufacture of pharmaceutical products for hospitals and ambulatory surgery centers. IPO occurred on 03-Feb-2011. Net institutional sales in the current quarter at -300.0K shares, which represents about 3.37% of the company's float of 8.89M shares. Shares shorted have increased from 352.59K to 1.04M over the last month, an increase that represents about 7.73% of the company's float of 8.89M shares.
4. Sequans Communications (Nasdaq: SQNS): Designs, develops, and supplies 4G semiconductor solutions for wireless broadband applications. IPO occurred on 15-Apr-2011. Net institutional sales in the current quarter at -603.7K shares, which represents about 3.6% of the company's float of 16.79M shares. Shares shorted have increased from 964.65K to 1.14M over the last month, an increase that represents about 1.04% of the company's float of 16.79M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Institutional data sourced from Fidelity, short data from Yahoo! Finance.
