Early Investors Jump Ship at Groupon
It has been a bad summer for social media stocks. Facebook has suffered since it's IPO earlier this year, while last week saw shares in Groupon plunge 20% after below expected earnings in the last quarter.
The group shopping site had another setback today with news that many of their early investors are selling their own shares in the company.
It has been revealed that at least four of the early investors in Groupon are to sell most, if not all, of their stock in the company. It means nearly $10 billion has been wiped from Groupon's value in the past few weeks, representing nearly 3/4 of its past value.
It leaves Groupon in esteemed company. Social gaming site Zynga has seen shares fall 70% since its IPO last December, while Facebook has also seen its stock fall over the summer.
A Groupon spokesman declined to comment on the stock slide. Facebook and Zynga declined to comment.
The move has sparked criticism that investors have puffed up stocks artificially by ploughing in pre-IPO, and that prices have then proved unsustainable when trading on the market.
"Groupon would never have gotten this big without that late-stage money," said Bill Gurley, a general partner at venture-capital firm Benchmark Capital.
Questions arose about Groupon's business model shortly after it disclosed its finances in June 2011. Some investors were surprised by how much Groupon spent on marketing to acquire new customers and there were suggestions that the bubble was about to burst.