IPO's Over: So Now Should You Invest in Groupon? Rake the leaves. Watch No. 1-ranked LSU play No. 2 Alabama in college football. Do anything this weekend to catch your breath from Groupon's IPO release on Thursday and its first day of trading Friday.

Then think. Think if you really want to take the plunge on Groupon (GRPN) when the market opens on Monday. Think if you can stomach buying shares in a Wall Street rookie that has lost hundreds of millions of dollars over the last three years.

It was easy to get caught up in the Groupon hoopla this week. Many did. The deal-packager sold 35 million shares at $20 a pop to amass $700 million in Thursday's IPO. Shares climbed in regular trading Friday to $31.14, before settling at a still-impressive $26.11 at the closing bell.

As you take your hard-earned 48 hours to decompress, DailyFinance offers a few expert opinions on whether to place your hard-earned money in Groupon. Think them over. Think it over.

One prominent broker who asked not to be identified told us Friday he wouldn't touch the stock with a 10-foot pole. "There's way too much volatility in this market right now to be playing with a social media IPO," he said. "Let it calm down for the next few days. It's not Facebook. It's just not there."

The broker predicted the stock would sink back to its $20 IPO price within 90 days -- perhaps something to think about over several weekends.

In a swipe at Groupon boss Andrew Mason, the broker added, "There's a lot of other cheaper stocks. There's plenty of names not run by CEOs who have gone from handling 50 people to 10,000 people."

Going Down


Groupon is catching its breath too, apparently. "Today's a significant step in Groupon's journey, but it's not the finish line," a spokesman told DailyFinance on Friday. "It's great to pause and recognize what we've accomplished, but we're focused on building a long-term business that really changes people's expectations of local commerce."

Observers all over stock nation paid careful attention to Groupon's market debut, in part because it could pave the way for other Internet biggies like Facebook to follow suit.

Earlier Friday, Business Insider CEO and Huffington Post blogger Henry Blodget tweeted, "Enjoy The Ride, Groupon Investors, I'm Outta Here!!"

Blodget once foresaw the skyrocketing value of a little stock called Amazon. He isn't seeing the same future for Groupon. Other than institutional investors who snatched up shares at $20 and flipped them in the surge, he recommended we sit tight. "There is NO WAY I would own Groupon's stock for the next few quarters at this price, given the business transition Groupon is currently undergoing," he wrote in his column.

A Merrill Lynch star analyst before he fell from grace when the SEC ordered him to pay $2 million in fines and $2 million in restitution for securities fraud, Blodget refashioned himself as a journalist who calls them as he sees them. What he sees for Groupon are a few rough quarters ahead. Groupon's valuation peaked at around $20 billion Friday, but could "easily" sink to $8 billion, he wrote.

Then again, he expressed what anyone considering buying this stock is probably thinking. What if? What if shares just kept soaring on a graph line that looks like a walkway to the nearest cloud? It's happened before. "Doesn't seem likely," he said.

CNBC's Mad Money host Jim Cramer urged viewers to stay the heck away, unless they were able to convert a quick profit in the flush of the first few days. Cramer said the company had yet to turn a profit and faced increased competition. He was also turned off by Groupon's wild fluctuations in value, from $30 billion to $10 billion before its IPO road show.

Cramer asked Groupon CFO Jason Sand what Groupon was doing to inspire investor confidence. Sand replied that the company was expanding into electronics sales and was refining its demographic targeting to avoid problems such as offering male shoppers mani/pedi discounts.

Because Groupon offers a service that is easy to relate to for many of us bargain hunters, there's a temptation to invest in what we know. But getting half off a facial is a lot different than plunking significant amounts down on a company that pundits keep punching in the nose.

Enjoy the weekend. And think.



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8 Comments

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powellpewter

Group On got to where they are utilizing predatory practices. They ignore internet users when asked to unsuscribe. Once they are ordered to stop the harrasement what is left? Only the nothing they are!

November 07 2011 at 10:12 AM Report abuse rate up rate down Reply
wagmar

Want to make money on Groupon? Check the SEC filing & determine when the "lockup" on the insider shares is over.
Sell the shares short (if they are available) the week prior to lockup expiration; massive insider selling will cause the stock price to fall like a rock. When the stock price drops by 50%, buy the shares to cover your short sale and pocket the difference. Now that is how one makes money using Groupon!

November 07 2011 at 9:37 AM Report abuse rate up rate down Reply
wagmar

Boiled down to its elements, Groupon is really just a scheme dreamed up by a group of individuals consumed with a pesky "marketing mentality'.

November 07 2011 at 9:25 AM Report abuse rate up rate down Reply
T.L. Rayworth

This is not a company that I would want to invest in. I am somewhat familiar with the company and the corporate structure. Their corporate inexperience is a concern and the potential for growth. Someone mentioned the format and it relies on a retail companies ability to absorb large discounting in order to move merchandise. Service industries do not have the same constraints and can offer substantial savings to consumers because their profit margins are incredibly high. But retail is a different matter. Let's say that you make 100% profit on your merchandise, meaning that you buy your product for one dollar and sell it for two. Groupon want's you to discount 50%, which means that your $2.00 dollar item is now selling for cost, But what about Groupon? They want a piece of the pie and they usually want 25%-50% of the pie, which means that the company would take a loss on each item sold. The pitch, you can get rid of unwanted merchandise or create interest in your business! This is true but the results are quite different. The consumer has a tendency to buy only those items offered and not go any further. In watching the website, I see very few repeat retail businesses and wonder why. The profits don't seem to be there and they appear to be management top heavy. Just an opinion.....

November 06 2011 at 5:20 PM Report abuse rate up rate down Reply
triplejtr

Groupon will never ever turn a profit under their current format. Unless they come up with a new way of making money they will be bankrupt in a year or so.
Its nice to have a huge amount of revenues but if I sell a dollar for 90 cents I would have a trillion dollars in revenues but I would never make a dime.
Their model is totally flawed and easily copyable and most retailers who do a groupon will quickly learn never to do it again.....

November 05 2011 at 5:30 PM Report abuse rate up rate down Reply
britishsteel

Now whats wrong with this sentence and I DO MEAN SENTENCE!
"A Merrill Lynch star analyst before he fell from grace when the SEC ordered him to pay $2 million in fines and $2 million in restitution for securities fraud " Whenever you CAN BUY YOUR WAY out T OF JAIL is when your judge's and Regulators { SEC } ARE CORRUPT ! There are laws for "THEM' and laws for you. They write the laws and they are written to favor 'THEM" DENY THEM YOUR SANCTION ! TAX REVOLT 4/15/2011

November 05 2011 at 7:20 AM Report abuse rate up rate down Reply
P.J.

I clicked it on after seeing GREAT coupon offers,only to find it is just another information gathering site! No email address NO COUPONS, AND allow them to sell my address to whoever,whenever they want,THEN i can get a buck of something! NO thanks,This thing ain't gonna fly in the long run.Consumers are getting way to hip to these games !! I would SELL!!!!!!

November 05 2011 at 1:07 AM Report abuse rate up rate down Reply
lionfig

Groupon has $1 billion in "revenues" not profits. What is the market value? 12.7 billion! What is the P/E ratio? 12,000?
Wall Street is a joke.

November 04 2011 at 7:48 PM Report abuse +2 rate up rate down Reply