Groupon Trading Altered by Short Covering Before Earnings

Groupon Inc. (NASDAQ: GRPN) is set to report earnings after the close on Monday. The online coupon website has not been without controversy after its shareholder losses have been massive, with losses of 60% since its initial public offering. Management has control here, so even odd behavior is not going to get anyone ousted. It appears that Groupon is being aided by short covering ahead of the earnings report rather than any massive excitement over the actual report.

Investors have to keep in mind that accounting issues for a company that has been public for this short a time is far from normal. Insider selling and the lockup expiration have all passed.

The gain in the stock was almost 12% on more than 10 million shares on Friday, with the close of $7.44 comparing to $6.65 the day before. And the early trading after the open on Monday has shares up about 5%.

As we noted on Friday, Groupon saw yet another big gain in its short interest as of July 31 to a record 55.2 million shares. That was versus 37.8 million shares short as of July 13, and it was evident that the bets against it were on the rise. It does not take a rocket scientist to realize that short sellers are getting out of the way here in case any less-bad or even good news is released with the earnings.

Thomson Reuters is looking for $0.03 EPS and $573.1 million in revenues. Estimates for the quarter ahead are $0.05 per share and $604.5 million in sales, and estimates for the full year are $0.18 EPS and $2.4 billion in sales.

At $7.82, Groupon is still worth close to $5 billion in market capitalization, and the 52-week trading range is $6.35 to $31.14.

JON C. OGG