Groupon Inc (NASDAQ: GRPN)
Groupon is having an incredible day in the market today, following up on incredible gains we’ve seen on the stock recently. Generally, when we see big gains in the market, the stock is growing for a very good reason. However, in the case of GRPN, the stock is climbing because of speculation, more or less. Ultimately, investors are speculating that GRPN is going to be acquired. Today, we’ll talk about why they believe Groupon is going to be the next high profile acquisition, how the market is reacting to the rumors, and whether or not an acquisition is likely. So, let’s get right to it.
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Why Investors Think GRPN Will Be Acquired
It all started back in February when it was announced that Alibaba had purchased a 5.6% stake in Groupon. At the time, investors and experts alike were already starting to discuss the possibility of an acquisition. However, that possibility became even greater recently. In fact, Alibaba recently got their hands on a $3 billion bank loan. No one knows what this loan is for, but considering the fact that before the loan was granted, Alibaba already had $18 billion on the books, it seems as though the company is planning something big. In fact, many argue that the new loan is signaling a high profile acquisition – most likely of GRPN.
How The Market Reacted To The Rumors
The truth is that the news moves the market. However, there are few pieces of news that have the ability to move the market quite like acquisition rumors. When investors believe that a company is going to be acquired, they seem to throw everything they have at the stock associated with that company, and that’s exactly what we’re seeing from GRPN. Currently, the stock is continuing its uptrend in a big way. By 11:17, GRPN had climbed to $4.20 per share after a gain of $0.18 or 4.35% thus far today.
Is An Acquisition Even Likely?
The truth is that Alibaba has neither confirmed nor denied that they plan to acquire a company. So anything at the moment would be mere speculation. With that said, let’s speculate, shall we? When investors saw the big loan, the first thing that came to mind is an acquisition of GRPN. However, it seems as though they are forgetting that Alibaba holds a larger stake in Yahoo! and due to the recent declines on Yahoo!, the company could get an incredible discount on the acquisition. Now, don’t get me wrong, a GRPN acquisition would be more likely, but we have to look at it from all angles. Think about it, what if Alibaba took out the loan because they’re working on something big in-house? The truth is that until an acquisition is confirmed, no one has a clue what to expect.
I see this time and time again, when it seems as though a company may be acquired, investors throw everything they have at the stock, hoping that an acquisition comes to fruition – quite like what they’re doing with GRPN at the moment. However, when the acquisition doesn’t happen, the stock sinks and many lose. Don’t get me wrong, it is possible that Alibaba might acquire Groupon, but it’s not confirmed! Don’t get caught up in the rumor trends and lose your money as a result.
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What Do You Think?
Do you think Alibaba will acquire GRPN? Let us know your opinion in the comments below!
[Image Courtesy of Flickr]