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Nov 11

Betting on Groupon

Over the last year, I have been having a long-running and sometimes heated (but civil) debate with a friend over whether it was a good decision for Groupon to turn down Google’s $6bn offer. To finally get away from “all talk, no action”, we made a bet with each other yesterday, just before Groupon priced.

The bet was that the average market cap over the one month period (based on the average of each trading day’s closing price, as reported by Google Finance) after the date 6 months after Groupon listed (i.e. 6 months from today) would be greater than $6bn.

We’re not finance guys, but this was roughly designed to factor in the 6-month lockup period and approximate a period in which many Groupon employees are likely to dump their stock on the market.

I think Mason was right in turning down Google, so I took the over side of the bet, and he took the under. The wager is nothing too glamorous – just a dinner. Although the venue was left unspecified.

Groupon priced at $20 last night – slightly above its $16-18 range. GRPN listed at $28 today, before falling to close at $26.11, giving it an implied market cap of about $16.6bn. To reach a value of $6bn, its stock price would have to decline to about $9.41. It’s a long way down from $26 to $9 (-65%), but it’s not unfathomable. Just look at Renren, which listed at $18 and, almost exactly 6 months later, is now just a little above $5.

  11:23pm  •  Business & Finance  •   •  Tweet This  •  Add a comment

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