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It’s Group-Off for Investors

The company's losses just won't go away


Facebook’s IPO filing last week juiced a score of social stocks last week, including Groupon, (NASDAQ:GRPN), which saw its shares soar 22%. On Wednesday, reality bit back hard. GRPN shares plunged more than 10% in after-hours trading after Groupon flubbed its first-ever earnings report as a publicly traded company.

Revenues actually were strong, up a staggering 194% to $506.5 million, and the company reported 33 million active users.

But the growth was not cheap — Groupon sustained a loss of $42.7 million. The company continues to invest heavily in global markets and also has moved into lower-margin categories, like travel services.

The report definitely should be jarring for investors. In light of Groupon’s huge scale, shouldn’t it be able to produce profits? Facebook seems to have no problems doing so.

So the debate about Groupon’s business model will surely continue, especially as the daily deals competition intensifies from players like Google (NASDAQ:GOOG).

In fact, the news could have broader-reaching implications, including creating some headwinds for the upcoming IPO of Yelp, which saw its own uptick in losses during the latest quarter.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”“All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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