Want to make money appear out of thin air? Simply become an institutional investor in an over valuated internet company and then offload your shares during their initial public offering (IPO). That appears to be the case with Groupon as shares in the company opened on Friday at $30, that’s $10 higher then the company’s proposed IPO pricing.
Under current market conditions the company is now valued at $20 billion, at least on paper, however analysts are warning that the quick flipping of shares by early investors is allowing the stock to artificially inflate.
Writing for Business Insider Henry Blodget notes:
“There is NO WAY I would own Groupon’s stock for the next few quarters at this price, given the business transition Groupon is currently undergoing.”
Blodgets prediction? $12 a share in the near future, although he does note that the stock could double, it’s simply too hard to tell how Groupon will handle their current business transition and new accounting practices.
In the meantime Groupon is just selling 35 million shares of the company through the Nasdaq exchange, representative of a 5.5 percent stake which is considered a small float when compared against most typical IPOs. In their SEC filings Groupon warns that the scarcity of shares could cause volatility in pricing over the short term.
On his company’s blog on Friday Grouon CEO Andrew Mason wrote:
“Our IPO is a small milestone on our journey,” while adding, “I feel incredibly grateful to serve as CEO of Groupon. With our IPO behind us, I couldn’t be more excited about what lies ahead.”
Do you think Groupon is over valued at this time?