Short-sellers bet Groupon coupon firm is overpriced

SHORT-SELLERS HAVE targeted Groupon in the days after its initial public offering, as they did social network LinkedIn after its debut earlier this year.

The online coupon seller sold shares last week and saw them jump 31 per cent from their $20 IPO price in the first day of trading. The shares were still 21 per cent higher by last Thursday.

However, when it first became possible to short the shares this week – meaning to borrow them from another investor and sell them, hoping to buy them back later at a lower price – short-sellers borrowed nearly all the available shares, according to Data Explorers, which tracks stock lending.

“There’s a perception the company is overvalued right now. There are analysts who make a strong argument it’s worth not much more than $8 a share, who believe it’s an IPO that doesn’t live up to the hype,” said Mike Bellafiore, a trader at SMB Capital.

As of yesterday morning, 5.5 per cent of Groupon’s free-floating shares were shorted, or nearly 100 per cent of the shares available to be loaned out, according to Data Explorers.

That trails well behind LinkedIn, which has 45 per cent of its free-floating shares being shorted, among the most of any IPO this year.

However, Alex Brog, analyst at Data Explorers, said that Groupon’s smaller short interest may be a reflection of the tiny float and it would take time for lending to ramp up, as it did for LinkedIn.

Groupon sold less than 6 per cent of its shares in the IPO, the smallest of any deal since 2001.

LinkedIn sold less than 10 per cent, still far less than the average of more than 20 per cent, according to Ipreo, a capital markets data and advisory firm.

However, there is also less bearish sentiment on Groupon, in part because of its relatively restrained first-day “pop”.

Groupon’s 30 per cent jump was mild compared with LinkedIn’s near doubling in price. – (Copyright The Financial Times Limited 2011)