Groupon's Busted IPO Status, A Warning For Other IPO Ambitions (GRPN)

Groupon, Inc.(NASDAQ: GRPN) was the talk of the IPO world and the market was willing to overlook all of the concerns we had about the offering in early November.  Now Groupon is a busted IPO.  Very busted. 

After pricing at $20.00 on November 4, the internet social coupon leader opened at $28.00 and had a supposed high north of $31.00 before closing at $26.11 on its first day.  While there have been some days where Groupon shares were higher, this one has effectively slid and slid.  The big concerns of the market were one thing, but it seems that investors are finally smartening up here.

The biggest issue is not just a low-float and multi-share class issuance in the stock.  Those are big concerns, but it is the business model that investors need to question here.  Groupon did not invent email, it did not invent social networking, and it surely did not invent coupons whether in paper-form or in online coupons.  There are zero barriers to entry here, and the company is hemorrhaging cash just to keep growing.

There is no reason at all to declare any “Told ya!” victories here.  That is not the point.  The big concern is actually beyond Groupon to the waves of pending and hopeful IPOs in the hopper.  This is proof that investors have to be careful about chasing growth at any price.  2011 allowed for some very interesting IPO models from Wall Street, and frankly some of these IPOs have looked and felt like tracking stocks more than true public companies where shareholders can have a say.

Groupon may be up 1% at $17.14 during the late-morning trading of a post-Thanksgiving trading session, but this is now a very busted IPO.

JON C. OGG