Groupon Shares Dive to New Low a Year After the IPO
Since the stock exchange has come back online following the superstorm in the Northeast, Groupon’s stock has fallen a catastrophic 13 percent to hit a new all-time low.
And while the coupon provider will no doubt feel an impact from the storm as restaurants and other services struggle to regain power, its latest drop has more to do with the upcoming anniversary of becoming a public company.
On Sunday, it will be exactly a year since the Chicago company raised $700 million to make it the largest IPO by a U.S.-based Internet company since 2004. On Nov. 4, 2011, shares sold at $20 a pop, and pushed higher during the day to close at $26.11 a share. Today, a year later, the company’s stock is down in midday trading by 4 percent, or 16 cents a share, to sell at $3.89 a share — its lowest price yet.
In Groupon’s relatively young life as a public company, it has seen its share of troubles, the worst of which was having to revise its fourth-quarter results at the end of March, making investors wonder if the high-flying young company was ready to be public. Since then, it has added numerous upper-level executives to the team to beef up its operational and accounting strengths, including two new directors on the board.
In May, Groupon CEO Andrew Mason said the bumps in the road were merely a side effect of its growth, which included hiring 11,000 employees in 48 countries in just three years.
“Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow,” Mason wrote in a letter to shareholders. “Perhaps more importantly, by moving quickly, we reached a scale that has helped us solidify our market leadership, and accumulated data that is enabling our future and helping us continuously improve the experience of our customers.”
More recently, Groupon has also tried to distance itself from being a provider of coupons or daily deals, instead stressing that it is building an “operating system” for local business, including mobile payment capabilities, scheduling software, and other tools. The goal of these services is not necessarily to make money, but to save small businesses money, so they can continue running Groupon’s higher-margin daily deals. The pivot, however, doesn’t come cheap. It necessitated construction of a major tech hub in Palo Alto, Calif., and has required buying several companies over the past year, albeit mostly for talent.
On Thursday, the company will report its third-quarter results, providing an update on how the business is doing on all fronts. Last quarter, analysts fretted that the company’s growth was coming from lower-margin businesses, like products, rather than its core daily deals offers. Groupon is forecasting Q3 revenue to come in between $580 million and $620 million, and for its operating income to total between $15 million and $35 million. In the second quarter, it reported revenue of $568 million and an operating income of $46 million.
While Sandy certainly had an impact on Groupon, it’s not enough to justify today’s dip in its stock. Groupon has very much become a global company, and even a densely populated area like New York represents a relatively small portion of its overall business. Today’s drop has more to do with the company’s overall business, and is a reflection of the past year.