IPO Lockup Shares Spook Groupon Investors

Groupon, Inc. (NASDAQ: GRPN) is a busted IPO gone wrong and it is feeling the Facebook, Inc. (NASDAQ: FB) sting along with the rest of the social media sector.  And to add insult to injury it looks as though it may open down another 7% and that would put it under $10.00 per share.  In short, Groupon has lost two-thirds of its value from the peak after the IPO above $31.00.

While investors may blame the unemployment report and the ongoing pressure from Europe, there is something else at work here.  Today will be the last day of the lock-up period.  Those insiders who own shares at $0.01, $1.00, or at whatever low price from their early stock options will soon be free to sell those shares into the stock market.

If you want to know just how much of the float this is, we have it at about 90%.  Dow Jones ran a piece saying that it was actually more than 93% in total.

It does need to be noted that venture backers and the CEO hold the bulk of the shares being unlocked.  That being said, they are unlikely to unload all of their shares at once and they are unlikely to unload a lion’s share any time soon.

Here is some irony for … Google Inc. (NASDAQ: GOOG) once upon a time was trying to acquire Groupon.  Google capped out somewhere around $6 billion or $7 billion, and Groupon was touting a $20 billion valuation or something like that.  The value of Groupon is now about $6.3 billion according to Yahoo! Finance.

Groupon’s shares are down by 8.3% at $9.76 on more than 2.4 million shares right after the opening bell.

JON C. OGG