The "quiet period" is a requirement that a company's insiders and
underwriters are not allowed to make comments about its IPO. It's a bit
archaic, but traders like to follow it. Why? When the quiet period ends 40 days
after the IPO, the underwriters' analysts can start putting recommendations on
the stock. As should be no surprise, they usually are upbeat. After all, the
underwriters probably want to get some follow-on business, such as secondaries
and acquisitions. In the case of Groupon, the quiet period expired today, and
the stock surged 9% Tuesday in anticipation of bullish comments. They never
came. Interestingly enough, various analysts were lukewarm, such as RBC Capital,
Credit Suisse (NYSE: CS ), Deutsche Bank (NYSE: DB ), Citigroup (NYSE: C ) and
Morgan Stanley (NYSE: MS ). The ratings range from neutral to sector perform to
hold. Even for the bullish analysts, the top price targets were only $29.
Consider that Groupon currently is trading at $22. So what's bugging analysts?
A general theme is valuation. The fact is Groupon's market cap fully factors
in much of the growth expectations. The stock also has plenty of risk. Groupon
has tough one-for-one competitors like LivingSocial (the company is in the
process of raising $400 million ). But Google (NASDAQ: GOOG ) also poses a big
threat. Just yesterday, the company purchased Clever Sense, which developed
Alfred a mobile app for restaurant recommendations. Groupon also been
decelerating its marketing expenditures, which should help improve short-term
profitability but could be a drag on the revenue ramp. Investors should be
cautious going forward with Groupon. If a company's underwriters get skittish,
it could mean a rough time for the stock. Tom Taulli runs the InvestorPlace blog
" IPOPlaybook ," a site dedicated to the hottest news and rumors about
initial public offerings. He is also the author of "All About Short Selling"
and "All About Commodities." Follow him on Twitter at @ttaulli . As of this
writing, he did not own a position in any of the aforementioned stocks.
No comments:
Post a Comment