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Groupon's stock price falling
The Groupon logo is displayed in the lobby of the company's international headquarters on June 10, 2011 in Chicago, Ill.
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Jeremy Hobson: Well the turmoil in Europe has sent stocks tumbling here in the U.S. And that is not good news for companies that have just gone public -- like Pandora, LinkedIn, and Groupon. Shares in the daily deal site are about half what they were
just after the company went public a few weeks ago.
Marketplace's David Gura reports.
David Gura: There's been a lot of buzz about Groupon, but the company doesn't have a long track record, and it still hasn't turned a profit.
Carl Howe is an analyst with the Yankee Group.
Carl Howe: Certainly, one of the big questions on Groupon's business model is, "How much of a long-term bet are they?"
And that may have spooked investors already worried about the economy both here and in Europe.
Howe: I think the IPO market is actually turning a bit more rational.
With so much uncertainty, investors are avoiding risk. But Peter Cohan, a venture capitalist, says don't write off a whole sector just because of what's happened to Groupon and a handful of other companies with high-priced IPOs.
Peter Cohan: I think you have to distinguish between the ones that have a competitive advantage and the ones that don't.
Investors have questioned the uniqueness of Groupon's business model: It's got plenty of competition. Cohan says some business models are good, and some business models aren't.
In Washington, I'm David Gura for Marketplace.
"Investors have questioned the uniqueness of Groupon's business model: It's got plenty of competition." This report suggests that the fall in Groupon's stock price reflects new competition, although the competition hasn't changed since the IPO. Mr. Gura should read the IPO chapter in Benjamin Graham's "The Intelligent Investor" for a better understanding of why this (and most IPOs) are overpriced.
