SAN FRANCISCO • Groupon Inc.'s stock fell below its initial public offering price for the first time Wednesday as investors reassess the challenges facing the still-unprofitable online deals company in a shaky economy.
The shares plunged $3.11, or more than 15 percent, to close at $16.96. That's well below Groupon's IPO price of $20, which was set less than three weeks ago. On its first day of trading, Groupon closed at $26.11.
The rapid fall from Wall Street's graces occurred almost entirely this week. Groupon has shed one-third of its market value since Friday's close to wipe out nearly $6 billion in shareholder wealth.
Political and economic uncertainty is making promising but unproven companies look less appealing.
Congress' inability to reach an agreement on how to reduce the U.S. deficit has raised the specter of automatic cuts and tax increases, which would increase the chances of the economy falling into another recession. That reduces Wall Street's appetite for risky investments such as Groupon, which is facing increasing competition in the rapidly growing niche of online advertising that it pioneered.
The decline also has been deepened by a skeptical class of investors, known as short sellers, who bet that certain stocks are going to slide. They do this by borrowing shares that they immediately sell, hoping they can repay the stock by buying at a lower price later.
Groupon gets local merchants to offer steep discounts to large clusters of consumers, a concept that turned it into one of the world's fastest growing companies. Founded in 2008, Groupon is on pace to generate more than $1.5 billion in revenue this year, primarily from commissions it gets from deals sold. Google Inc., which runs the Internet's largest advertising network, had annual revenue of just $86 million at the same stage of its existence.
Unlike Google, though, Groupon has been amassing huge losses as it tries to expand and ward off threats from hordes of copycats. The competition includes Google and Amazon.com.
Through the first nine months of this year, Groupon lost $308 million, partly because its payroll swelled to more than 10,400 employees.
