Groupon made its debut on the stock market earlier this month and was warmly welcomed, with investors rushing to buy its shares. The stock climbed by an impressive 50 percent on its first day of trading. However, things took a downturn for Groupon this Wednesday as its share price fell below the initial offer of $20. Groupon’s shares dropped by 14.2 percent to $17.22 on the Nasdaq, marking a total decline of 34 percent.
Some market experts believe this downward trend might continue unless Groupon can share some good news. One reason for Groupon’s significant drop could be its main competitor, LivingSocial. LivingSocial, partly owned by Amazon, announced plans on Monday to offer over 20 special deals with national companies for Black Friday. These deals might attract many new customers, but they also squeeze profit margins.
Another factor that might have contributed to Groupon’s stock decline is how easy it became for investors to short-sell, or bet against the company. In Groupon’s first week on the market, there were few shares available for short sellers who need to borrow shares before selling them. But this situation changed significantly this week.
Some financial analysts think that Groupon’s initial valuation was too high to begin with. For these market watchers, the quick drop in Groupon’s share price was no surprise.