Shares of Groupon
A troubled existence
Groupon has been under fire (for good reason) since the company made its stock market debut last November, from pre-IPO investigations into false information in its S-1 to inflating its fourth-quarter revenue by $14.3 million. At this point, I think it's fair to say that this isn't just a case of Groupon working out the kinks of its novel business model.
The deal-of-the-day website is flooded with risk that many investors are tired of holding. In addition to its own internal issues, Groupon operates in a space that's crowded with hot-shot competitors such as Amazon
Meanwhile, Microsoft started wheeling and dealing last year when it launched MSN offers. Clearly, this isn't a business that's difficult to enter. Groupon is down more than 60% year-to-date, which is decidedly lower than its rivals.
What's the deal?
Groupon continues to underperform the group. This is the second time this month that the stock has tumbled. On July 2 shares slid on news that Groupon Chairman Eric Lefkofsky was taking a step back from his role at the company. It's discouraging to see a Groupon co-founder turn his back on the company at such a critical time. In hindsight, Groupon shouldn't have turned down a possible takeover by Google
However you cut it, things don't look good for the daily deals site. Concerns over the financial health of the business are nothing new. Not only do I think the current stock price is well deserved, but I also have little confidence in management's ability to turn things around. I stand by my underperform CAPScall on the stock.
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