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Groupon shares fall off a cliff, down 42 percent since IPO

The company's stock is opening the day at its worst price yet after dropping 9 percent yesterday.

When Groupon went public earlier this month at $20 per share, the daily-deals provider saw its stock soar. But now, Groupon has become a losing proposition for its shareholders.

The company's shares yesterday dropped 9.01 percent, or $1.51, to settle at $15.24. That's despite the fact that Nasdaq was up 3.5 percent yesterday.

Since Groupon went public, the company's stock has declined 41.63 percent, and by the look of things, the drop could continue until shareholders start to see some positive financial news come out of the company.

The issue is, Groupon has never been profitable. Last year, for example, the company lost $390 million on $313 million in revenue. So far this year, its revenue has jumped considerably to more than $1 billion over the first three quarters, but it has still lost $308 million over the the same period.

That said, some analysts think a combination of Groupon's business model and a sluggish economy could continue to weigh heavily on the company's earnings.

"There has been concern that the company's revenues are not sustainable amidst growing competition in the sector and a weakening economy that could have an impact on consumer spending," analysts at Wall Street Equities Research said in a statement last week. "Analysts also cite their business model might not be sustainable as customers analyze the ROI of using Groupon to market their products or services."

There is another element to Groupon's troubles. When the company went public, its float--a measure of the difference between outstanding shares and restricted shares--was extremely small. When stocks have smaller floats, they are typically more volatile and react to the changing market. What's more, after the mandatory 180-day lockout period that restricts company employees and early investors from selling the company's stock, it's quite possible its share price could plummet when workers start cashing in on their stock options.

A similar scenario played out at LinkedIn. Because it went public with a small float, LinkedIn earlier this month was forced to sell 8 million more shares in a secondary offering to keep its stock price from plummeting after employees cashed out. Groupon might eventually need to follow suit.

So far today, however, things are looking up for Groupon. In premarket trading, the company's shares are up 1.51 percent to $15.47.