Stephen Foley: Groupon share offering prompts shopping spree
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 05 November 2011
Outlook: Two ways to stoke a buying frenzy: you can make something so cheap it's a no-brainer, such as when Groupon offers nose jobs for $100 or some such, and causes a customer stampede; or you can make something so scarce that people will pay through the nose for it – like when Groupon sells its own shares to the public.
The 50 per cent pop in the Groupon share price in the first hours of trading yesterday reflects the fact that barely five per cent of the company has been floated more than it signals enthusiasm for the fundamentals of this business. Investors lucky enough to get an allocation of shares could flip two-thirds of their holding to secondary-market buyers and have the rest of the stock on their books for free. It doesn't matter to them whether Groupon becomes a lasting business.
The company will correct this disgracefully narrow free-float over time, but, as LinkedIn's share price plunge this week showed, that will be another downward drag on a stock that can only defy gravity for so long.
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