Around the Net
Street Bets Against Groupon
- Bloomberg, Friday, November 11, 2011 11:45 AM
How confident is Wall Street in Groupon’s prospects? Well, last week, the daily deal site completed the biggest initial public offering by a U.S. Internet company since 2004. Now, however, the company’s stock ranks among the most difficult for short sellers to borrow and bet against. “The cost to borrow Groupon shares to short them is rated a 10 by Data Explorers, the most-expensive level on the New York- based research firm’s scale,” Bloomberg reports.
Translation? “Strong demand to borrow the stock to bet against it and a small supply of shares available to borrow mean that investors must pay higher fees to bet against Groupon,” Bloomberg explains, citing Data Explorers. The shares have jumped 22% since Groupon’s Nov. 3 IPO, when the company raised $700 million selling 35 million shares at $20 each. “The cost to borrow the Groupon stock is extraordinarily high,” Mike Shea, managing partner at Direct Access Partners, tells Bloomberg. “There is a perception out there that this business model is easily duplicated and thus, the valuation is not justified.”
In the short-term, however, the limited supply of shares available for trading and borrowing may mean the stock will continue to rise, hurting short sellers who bet on declines, according to Robert Lawton, managing partner at Catoosa Fund.
