Groupon stock down by more than 70% from IPO price

Groupon - stock in the deal deals site off by more than 70% from its IPOShares in daily deals website Groupon fell by more than 70% in after hours trading yesterday as it became the latest next generation dotcom stock to hit trouble along with Facebook and Zynga, which last week lost its COO.

Groupon shares hit a life-time low of $6.05 in after-hours trading before recovering some what and rising to 7.55 as investors took advantage of the fall.

The drop came as Groupon missed quarterly revenue expectations and gave a cautious profit outlook.

Groupon reported second quarter revenues of $568.3m. Wall Street had expected $573m, according to Thomson Reuters.

Groupon floated on the Nasdaq in November at a price of $20 a share. Its shares, however, quickly started to sink and have not recovered.

There was further disappointment for Wall Street in Groupon’s third-quarter income. Groupon said income from operations would be $45m to $65m. Wall Street had been looking for about $70m to $80m.

Groupon also suffered a fall in gross billings, the income it gets from customers buying daily deals, which hit $1.29bn for the second quarter compared to $1.35bn in the first quarter.

Jason Child, chief financial officer, said revenues for the next quarter could range from $580m to $620m, which is again lower than Wall Street expected, and reflects uncertainty in Europe.

Andrew Mason, Groupon CEO, said this was down to there being less demand for higher priced deals in Europe.

“While deals such as laser hair removal and luxury hotel stays in Monaco give Groupon an element of discovery that is key to our brand, we’ve also found that these more discretionary offers are more susceptible to negative demand elasticity over the past few quarters as macroeconomic conditions have deteriorated.”

He said that Groupon was planning to rebalance its offer in Europe to strike a more even relationship between discounts and other benefits it provides to European consumers.

“We’ve learned in North America that the best way to maximize gross revenue dollars for Groupon is to find the right balance between consumer and merchant value,” Mason said. “By doing so in Europe, we have a clear opportunity to unlock growth and achieve the same kind of market penetration of Internet users that we have in North America.”

Mason added that one-third of Groupon’s US and Canadian transactions were now completed on mobile devices. Those customers he said were spending 50% more than desktop users.

However, looking at Europe, and the rest of the world, he said the company was “under-penetrated” on mobile devices.

“We see that as a major opportunity,” Mason said.