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Groupon shares open up 40%

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Re: Groupon shares open up 40%

#51

Post by chollida1 »

vsl2 wrote: post #7

I haven't felt this strongly about shorting a stock long-term in a long time. But I don't know how long the short-term irrational exuberance is going to last - will it wipe out my investment before the stock crashes down? I haven't seen one pro-Groupon (or general daily deals) analyses that says anything different than "it gets people in the door and generates buzz" which I think is nothing more than fuzzy PR talk si…

> haven't felt this strongly about shorting a stock long-term in a long time. But I don't know how long the short-term irrational exuberance is going to last - will it wipe out my investment before the stock crashes down?

I'd be more worried about the borrowing costs killing you.

Small float, check Hedgies got their pop and exit, check Lots of short interest, check

it's going to cost you dearly to short.

Re: Groupon shares open up 40%

#52

Post by shn »

peterb wrote: post #3

"Groupon is only floating a small amount of shares, 35 million – about 5.5% of its 637.3 million shares outstanding." This reminds me of Jason Fried's prank that 37 Signals valuation tops $100B! http://37signals.com/svn/posts/1941-press-release-37signals-...

If the offered number of shares are that low, maybe supply and demand mechanics are in play and that might result scarcity in the market and drive the price upward further in the coming days or even weeks. If they did offer that much less intentionally may be they will be able to sell other shares with higher prices slowly. What do you think, does this scenario make sense?

Re: Groupon shares open up 40%

#53

Post by potatolicious »

raganwald wrote: post #29
sunchild wrote: post #17

Earlier quoted context omitted.

Doesn't it concern you that Groupon works best for services that no one needs ? I would say that in times of austerity, yoga, helicopter rides, health spas, parachuting, etc. are the first to go.

First, I agree that this is an insightful observation, and it certainly applies to conventional suppliers. For example, if demand for yoga classes drops, the demand for professional-grade yoga mats will drop. But a businesses like an advertising agency or coupon distributor is not a conventional supplier: It exists to create demand for things people don’t think they need. In times of austerity, it’s true that “organi…

There's another factor though - in a down economy luxury goods and services tend to get squeezed. Prices will drop, margins will decrease.

What the Groupon model wants to do is throw a 50% discount on top of that. When times are good, margins on luxury services may be enough to let this slide as a marketing expense. What about when times are bad?

Re: Groupon shares open up 40%

#54

Post by jamesbritt »

druiid wrote: post #41
jamesbritt wrote: post #39

I've been getting what seem to be Groupon-ish offers from both Amazon and Google. Basically discount deals for things in my area, "pay $10 for $20 worth of foo" kind of things. I never (that I'm aware of) asked for these offers, and it seems that if both Google and Amazon are actively pushing these out to their user base that Groupon is already borked.

The Amazon offerings are provided by livingsocial... just an FYI.

Thanks. I've not looked closely at them, just a glance as they turn up in my mail.

Re: Groupon shares open up 40%

#55

Post by raganwald »

potatolicious wrote: post #53
raganwald wrote: post #29

Earlier quoted context omitted.

First, I agree that this is an insightful observation, and it certainly applies to conventional suppliers. For example, if demand for yoga classes drops, the demand for professional-grade yoga mats will drop. But a businesses like an advertising agency or coupon distributor is not a conventional supplier: It exists to create demand for things people don’t think they need. In times of austerity, it’s true that “organi…

There's another factor though - in a down economy luxury goods and services tend to get squeezed. Prices will drop, margins will decrease. What the Groupon model wants to do is throw a 50% discount on top of that . When times are good, margins on luxury services may be enough to let this slide as a marketing expense. What about when times are bad?

Makes sense when you’re selling bikes... a 50% off coupon only makes sense if your margins are 50% to begin with. But when you’re renting bikes, you have already sunk the cost of the bikes and are now looking to extract value from excess capacity. So the economics are different.

Or getting back to Yoga, it’s hard to offer 50% off your price for Lululemon clothes if you’re already discounting your prices to match the economy. But if you have a Yopga studio, your rent has already been paid. If you only have 10 people booked for a class that can hold 20, a coupon deal for ten more people may seem attractive.

Especially if Groupon fronted you the money for the attendees out of the capital they’re raised.

(Still not endorsing Groupon the company, just trying to be “fair and balanced” and make sure we’re looking at all of the factors in play.)

Re: Groupon shares open up 40%

#56

Post by Jage »

potatolicious wrote: post #53
raganwald wrote: post #29

Earlier quoted context omitted.

First, I agree that this is an insightful observation, and it certainly applies to conventional suppliers. For example, if demand for yoga classes drops, the demand for professional-grade yoga mats will drop. But a businesses like an advertising agency or coupon distributor is not a conventional supplier: It exists to create demand for things people don’t think they need. In times of austerity, it’s true that “organi…

There's another factor though - in a down economy luxury goods and services tend to get squeezed. Prices will drop, margins will decrease. What the Groupon model wants to do is throw a 50% discount on top of that . When times are good, margins on luxury services may be enough to let this slide as a marketing expense. What about when times are bad?

Times are bad....

And yet Groupon obviously is doing alright.

Using your logic, shouldn't one be bullish on Groupon considering it'll make MORE money once the economy improves ? Using your logic of course....

My real problem with all this negative talk is that it's become a fad.

Groupon is gonna crash! It's a ponzi scheme! It's not worth anything!

Since so much sentiment is against Groupon, I tend to favor it more. Don't get me wrong, they've had a lot of problems, but it's definitely not the total disaster so many make it out to be.

Don't forget that contempt and fear are just as irrational as exuberance and greed.

Re: Groupon shares open up 40%

#57

Post by ScottBurson »

unfletch wrote: post #30
ScottBurson wrote: post #24

Earlier quoted context omitted.

"Markets can stay irrational longer than you can stay solvent." -- Keynes

I agree with the sentiment, but the quote is misattributed. It was probably first said by Gary Shilling, a writer for Forbes, in 1993: http://quoteinvestigator.com/2011/08/09/remain-solvent/

Wow. Funny how these things take on a life of their own. A lot of people now think Keynes said that.

Re: Groupon shares open up 40%

#59

Post by sunchild »

Jage wrote: post #56
potatolicious wrote: post #53

Earlier quoted context omitted.

There's another factor though - in a down economy luxury goods and services tend to get squeezed. Prices will drop, margins will decrease. What the Groupon model wants to do is throw a 50% discount on top of that . When times are good, margins on luxury services may be enough to let this slide as a marketing expense. What about when times are bad?

Times are bad.... And yet Groupon obviously is doing alright. Using your logic, shouldn't one be bullish on Groupon considering it'll make MORE money once the economy improves ? Using your logic of course.... My real problem with all this negative talk is that it's become a fad. Groupon is gonna crash! It's a ponzi scheme! It's not worth anything! Since so much sentiment is against Groupon, I tend to favor it more. D…

It might be a fad on the day of the IPO, but if you break Groupon's business model down to its essential elements, it requires a huge number of leaps of faith to rationalize its competitive advantage and revenue potential. Goldman Sachs says they predict 40% growth year over year for the next two years. That sounds extremely fishy to me, given the already-dubious value of the service, the low technical and financial barriers to entry, the lack of loyalty from merchants and consumers alike, the allegations of crooked books, the early cash out for founders and investors, etc., etc. Too rich for my blood, I guess.

Re: Groupon shares open up 40%

#60

Post by ww520 »

smackfu wrote: post #13
vsl2 wrote: post #7

I haven't felt this strongly about shorting a stock long-term in a long time. But I don't know how long the short-term irrational exuberance is going to last - will it wipe out my investment before the stock crashes down? I haven't seen one pro-Groupon (or general daily deals) analyses that says anything different than "it gets people in the door and generates buzz" which I think is nothing more than fuzzy PR talk si…

I've been burned by this before, especially by the margin requirements for a short-sale. It doesn't matter how confident you are a stock will crash, because if it keeps going up, eventually you will either need to sell at a big loss or add more money to keep up. And it's very tempting to short even more as it continues to go up, since you'll make even more when it crashes! And then you run out of money and are screwe…

Wait until the lockout period for the employee options expires, like in 6 months, then short it hard. Do it like 2 months beforehand because everyone else is thinking the same thing.
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