The Groupon IPO has investors scurrying for a piece of the pie. But some analysts say the initial public offering and its low float rate may be good for day traders, but bad for long-term investors.
It's being hailed as the largest and most successful stock offerings of an Internet company since Google released its IPO in 2004. Already, the "daily deals" coupon leader raised $700 million, and is valued at more than $13 billion, citing a Reuters story.
On the surface, it's a great day in the stock market. But some analysts caution that the low float rate of the Groupon IPO may come with some risk.
When the most anticipated initial public offering opened up for trading Friday, it was clear soon after that it was a success.
But to give a correct account of its overall performance, time must measure the amount of traders who hold or sell the stock.
The "float rate" is defined as the amount of shares of a security or IPO available for active trading. Ordinarily, a low float rate means the stock's price could go up and down, giving it a high degree of volatility. The general rule is: The higher the float rate, the more stable the stock's price.
Groupon is under fire for changing its valuation twice ahead of the IPO. Undoubtedly, Wall Street will have concerns over its accounting practices.
With only Linkedin and Pandora as clues to how things will shape up, it's a tough call in predicting if the Groupon IPO is successful, or will crash and burn. With over 150 million people it markets to daily, there is just no other standard to compare it to.