The Groupon (NASDAQ:GRPN) death march continued today, with the stock losing another 8% to fall back below $5, or less than a fifth of its value since its IPO.
So what’s the problem now?
Groupon’s merchants are none too thrilled with the service, according to a report from Aaron Kessler, an analyst with Raymond James.
Kessler conducted a survey of more than 100 Groupon merchants and found that while 16% of merchants were “very satisfied” with Groupon’s promotions and 37% were “satisfied,” that still left about a third of the merchants who were either “unsatisfied” or “very unsatisfied.” And nearly 40% said they would not run another deal within the next couple years!
The results should not be a surprise. It’s inherently difficult for a merchant to find loyal customers simply by slashing prices in one-time deals — especially considering many who use Groupon only frequent places for said daily deals before moving onto the next bargain.
Sadly, the Kessler report was not Monday’s only piece of negative tidings for Groupon. Ken Sena, an analyst for Evercore Partners, put the company on his “conviction sell” list — with a price target of $3.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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