The CHART OF THE DAY illustrates the performance of Groupon’s shares since the largest daily-deal website went public in November. Yesterday’s close of $4.31 was 78 percent lower than its initial public offering price of $20. The drop is the biggest among U.S. IPOs completed during the past 12 months, according to data compiled by Bloomberg.
Damodaran, who has written four books about valuing investments, says Groupon is worth $4.07 a share in a blog posting on Aug. 24. He had originally valued the Chicago-based company at $14.62 a share.
“It is clear that I underestimated how quickly any competitive advantages that Groupon’s first-mover status gave them would be eroded,” he wrote, referring to its relatively early entry into the online-coupon business. “It is difficult to see what the company can do to set itself apart from the competition and make money at the same time.”
Shares of Groupon had their most recent gain on Aug. 13, and have fallen 43 percent since then. The retreat began after the company posted second-quarter sales that trailed analysts’ average estimate in a Bloomberg survey.
Whether Groupon’s business is “scalable, defensible and valuable” has been called into question, Damodaran wrote. The criteria refer to the company’s ability to expand and to fend off rivals, along with the value of its operations.
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