November 29, 2011, 2:28 PM —
REUTERS/Las Vegas Sun/Steve Marcus
The good news for shareholders of Groupon (NASDAQ: GRPN) is that the daily-deals site's stock was up more than 7% in Tuesday trading.
The bad news is that there's no other good news. Since going public on November 4 following a rough quiet period, Groupon shares were down 42% through Monday's trading from their first-day closing price of 26.11.
And they were down 51% from the 31.14 that some suckers paid on IPO day. Groupon is going to need a whole lot of days like Tuesday -- assuming shares remain elevated -- to dig itself out of its Wall Street hole.
The problem is there's no apparent catalyst which could make that happen. Groupon's IPO was greeted with great skepticism by many analysts and investors for good reason. The company continues to sustain heavy losses, even as revenue increases. That's because it's spending like crazy on marketing and expansion.
There also are signs that growth is plateauing. Numerous competitors, including LivingSocial, have sprung up and the barriers to market entry remain fairly non-existent.
Groupon doesn't have the kind of leverage that eBay had a dozen years ago or Facebook has now, so it's only natural defense is to grow as fast as possible. But it can't keep doing that if it continues to lose money.
So, really, the only thing that can instill investor confidence in the daily-deals site's future is a solid quarterly performance, and we won't get an earnings report from Groupon until next January or February.
That seems like forever if you're watching the stock you own continue to lose value. Perhaps even worse, there's a perfectly good chance that Groupon's quarterly earnings, if they don't show financial progress for the daily-deals site, will put more downward pressure on shares.
Then there's the SEC-mandated 180-lockout period for new stocks, which ends for Groupon next May, thus allowing shareholding employees and early investors to cash out. More downward pressure.
I suspect Groupon IPO Day buyers are feeling a bad hangover right about now. And it's not likely to go away any time soon.