Groupon shares tank as insiders dump stock
This could well be a preview of Facebook's stock when its lockup agreement expires in a few months.
- SABEW Best in Business 2011 Award for Breaking News Coverage, Eddie Award in 2020 for 5G coverage, runner-up National Arts & Entertainment Journalism Award for culture analysis.
Groupon shares dropped nearly 9 percent Friday as insiders took their first opportunity to cash in on their stock.
Groupon shares fell 8.7 percent to $9.72 in early trading on Friday. The company went public in November at $20.
The decline is largely attributed to the expiration of the insider lockup agreement, or the period after an initial public offering when insiders are unable to sell their stock. That expired on Friday, allowing insiders to freely cash out, the Chicago Tribune pointed out.
Today's sell-off represents a cautionary tale for Facebook, which just went public last month and is in the beginning of its own lockup period. Facebook's lockup period, in fact, is shorter than that for most IPOs, with a large chunk of shares freed up after only 90 days.
As with Groupon, Facebook's stock is expected to take a hit as insiders take their opportunity to sell.
While Facebook has had its share of issues over the past few weeks, the stock did rally yesterday. The stock is down 3.2 percent to $28.66 today.
Still, Facebook's troubles have left investors pessimistic about Internet stocks in general.
Groupon, meanwhile has had to deal with its own issues, including questions over the effectiveness of its promotions, the threat of a growing number of competitors, and its long-term growth prospects. The company actually extended the lockup period to Friday from May 2 after it restated fourth-quarter and full-year results at the end of March.
Concerns over Groupon's business jumped after the company restated its revenue and disclosed a "material weakness" in its internal controls, prompting a possible Securities and Exchange Commission probe. The company's first-quarter results, however, exceeded expectations.
Groupon co-founders Andrew Mason (who's also the CEO), Eric Lefkofsky, and Brad Keywell, have expressed a commitment to hold on to their shares, the Chicago Tribune said, citing comments made by Mason at an investor conference.