Groupon’s pop

November 4, 2011
this post is likely to get even more coverage.

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With Groupon spiking at the open to $28 per share, this post is likely to get even more coverage. Stocks with big opening-day pops, it seems, tend to fall dramatically thereafter. Which bodes ill for anybody buying Groupon at these levels.

But I hate the chart which accompanies the post. It looks as though there is only one x-axis, which goes from -100% to +200%. If a line goes to the right of zero, that means it’s above its IPO price, and if a line goes to the left of zero, that means it’s below… um… not its IPO price, actually. In fact, we’re never told exactly what the red and green lines are measuring.

I think — and I’ve gone back and forth with Mark Gimein, the author of the post, on this — that it’s measuring the price action from the opening tick through Nov 2. In other words, it’s showing how the stock did over and above its opening pop: where there’s a green line, the stock opened high and then just went higher.

In any case, the good news for Groupon buried in this chart is that if you take the 25 stocks with the biggest opening-day pops, they’re up by 9.25%, on average, from their offer price. So given Groupon’s a big pop, there’s a very good chance that it’ll be above $20 per share for the foreseeable future. And remember that the conventional wisdom, as of a day or two ago, was that Groupon was worth maybe $5 billion tops, or somewhere in the $8-per-share range. Instead, even if Groupon falls back towards $20 from here, it’s still likely to be worth an eleven-figure sum for the foreseeable future.

This is good news for me, too. I have a bet on with Rocky Agrawal: if Groupon is worth more than 30% of the value of Priceline on October 31, 2012, then he owes me dinner. Right now, Groupon is worth 72% of the value of Priceline. So I have a nice cushion. At least for the time being.


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