Groupon debuted on the stock market earlier this month and was met with a welcome reception, with investors eager to purchase its shares. The company’s stock was so sought-after that it soared an impressive 50 percent on its first day of trading. However, this Wednesday marked a downturn for Groupon, with its share price dipping below its initial offer of $20. Groupon’s shares fell 14.2 percent to $17.22 on the Nasdaq, a total decline of 34 percent.
Some market experts predict this downward trend may persist unless Groupon can bring some positive news to the table. One cause of Groupon’s significant stock drop may be attributed to its biggest rival, LivingSocial. The latter, which counts Amazon.com as one of its partial owners, revealed on Monday its plan to roll out more than 20 exciting deals with national companies specifically for Black Friday. These nationwide bargains may attract a considerable number of new customers. However, such promotions also put immense strain on profit margins.
Another factor that could have influenced the decline in Groupon’s stock is the ease with which investors could short, or bet against the company. During Groupon’s first week as a publicly-traded entity, few shares were available for short sellers, who are required to borrow shares before they can sell them. However, the scene changed drastically this week.
Some financial analysts believe that Groupon’s initial valuation was steep to start with. According to these market observers, the prompt slump in Groupon’s share price comes as no surprise.
