Groupon’s stock price falling

David Gura Nov 24, 2011

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.

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