Remember that time that one daily deals company IPO’d, and everyone was really excited about it, except for those crazy, mean naysayers (like Google searches for it) who were like, “this will not end well because Groupon (GRPN) is basically a very sophisticated Ponzi scheme” and made flow charts that may have suggested this?
Well, guess what? Today, those people are eating Correct Sandwiches for lunch.
Let’s take a quick look at the last month in Groupon, shall we?
Now, hey, come on, that doesn’t look so bad. Groupon’s IPO gets priced at $20, and it opens a little above $30 on its first day. It starts an inevitable post-IPO comedown and slides down to the $24/$25 range in the following week, but a little over ten days later, has picked itself up by the bootstraps and sits pretty at $26.19. Not bad!
You know that moment at the end of every bad, cliche horror movie where the protagonist has finally escaped the nightmareish scenario they found themselves in, and are finally catching their breath as they drive away, and then all of the sudden, we catch a glimpse of the killer in the back seat and it’s like, BAM, cut to credits?
In this situation, that killer is called “reality.” [Insert knife noise from Psycho here.]
And here we are today, at 1:27 PM, as GRPN’s trading volume goes up, and its stock goes down, down, in the week three round. TechCrunch astutely notes that the price to borrow shares went down, and you know what borrowing against a security people think isn’t so great is good for, right?
But it also seems that the recent decline of Groupon’s stock is a result of just how many shares it sold at IPO. Groupon sold about 5.5 percent of its stock on November 4th (of its 637.3 million shares outstanding), meaning that a relatively small amount of stock was available to short sellers. As Crain’s points out, the premium to borrow shares (in advance of shorting) dropped from 90 percent to 30 percent early this week. And it looks like the short-sellers are moving fast and furiously.
Emphasis ours. The Groupon “market correction” many people saw warned in the wake of a euphoric tech IPO has arrived.
And now, a little anecdote:
Two weekends ago, Betabeat was at a house party in Brooklyn. At this house party, where some people were drinking, we may have been heard loudly complaining that we’d spent much of the last month thinking about Groupon. We were debating the merits of whether or not this was the premium use of what little intellectual power we may possess.
At that point, the most obviously inebriated person in the room spins around and turns to us. Here, we should note the nature of this person’s inebriation, which could be likened to one of those inflatable bags one knocks down only to pop right back up, as he was never not seen offering himself and anyone within reach yet another round of tequila. He’s the kind of young person whose drinking prowess seems like either a medical liability or anomaly. And, with a large grin on his face, and a tequila bottle in hand, he exclaims:
I work for a hedsh fun, and we [throws arm around Betabeat’s shoulder] short thesh shit outta Groupon!
We respond: Wow. But isn’t that an incredible expensive play to make right now?
Not if you’re right! It was expensive as fuck, but fun as hell! And we made ourselves a ton. And we’ll keep doing it when itsh gets in cheaper!
We contacted the party’s host to see if we could speak with this person under more sober circumstances.
you remember that shitfaced guy from Saturday who just, like, kept popping up everywhere? i want to interview him about working at a hedge fund and shorting Groupon. do you have his contact?
She replied:
“he went to [school] with my old roommate. i also don’t know his name but i call him [something that is very obviously not this person’s name].”
We have yet to find this person, but when we do, we will speak with him about the ecstasy of being a Groupon short. Given the day Groupon and Groupon Shorts just had, he’s probably all smiles at the moment, and also, very possibly drunk. Still.
As Groupon continues to thrive—while they’re still nearly putting the people they’re profiting from out of business—and tech companies continue to IPO, it goes without saying, but there’s some amusing poetic justice in the one straight-up Groupon IPO euphoria-antagonist we’ve met being some twentysomething kid who’s easily the drunkest person we’ve seen at a house party in months.
fkamer@observer.com | @weareyourfek