Thursday, November 24, 2011

Remember Groupon?

I have written about Groupon several times in the past few months or so (Read here, here and here). I think it is clear by now that I am uber anti-IPOs and will remain so for a long long time. If you are still not convinced about the evilness of IPOs, here are more reasons for you:
For the first time since it went public earlier this month, Groupon broke below its offering price of $20 per share. Shares of Groupon fell 16 percent on Wednesday to close at $16.96. 
The popular daily deals site had wrestled with intense scrutiny and volatile equity markets in the weeks leading up to its offering, but its debut was widely heralded as a strong performance. On its first day of trading, Groupon rose as much as 50 percent, before settling at $26.11 per share.
Here is what the chart looks like:

Can you imagine your wealth being eroded by 16% in one day? Yeah, you can tell me that if you had subscribed to the IPO and sold off at USD26, you'd make a handsome profit. But human greed does not work like that. When the price hit USD26, you would have hoped for it to go even higher.

Buying into an IPO is like injecting heroine. It can appear to be fun while the high lasts. And when you are high, you will want more of it. That is, until the high is gone.

How do you like Groupon now?

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