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Groupon plunge fuels concerns about unrealistic valuations

Groupon is one of several tech companies that trade at unrealistic valuations

Shares in Groupon have plunged of late, and the online coupon seller is currently positioned at just above its initial public offering price, the Financial Times reports.

The stock was sold at $20 on November 4 and fell to $20.03 on Tuesday, significantly below its debut price of $28.

Shares in Groupon have plunged of late, and the online coupon seller is currently positioned at just above its initial public offering price, the Financial Times reports.

The stock was sold at $20 on November 4 and fell to $20.03 on Tuesday, significantly below its debut price of $28. This is fueling analysts' concerns that the company may fall victim to competition from Facebook, Google and LivingSocial. Groupon is one of several tech companies that trade at unrealistic valuations after floating small percentages of their shares in IPOs.

"It went out at a price that was too high and was a very small float," Espen Robak, president of Pluris Valuation Advisors, told the news source. "Usually you’re going to see some after-IPO buying, but falling this sharply is a sign of the lack of demand."

The media outlet explains that the unrealistic valuations were caused by "scarcity that makes it expensive to borrow shares and bet against them."

Earlier this month, Robak noted that Groupon stock is "very much like a lottery ticket," as quoted by Advertising Age.  

Comments

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

Well, that IS why they are called unrealistic...

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