Groupon shares drop after Sandy hit U.S. merchants

Reuters News
Posted: Oct 31, 2012 2:56 PM
Groupon shares drop after Sandy hit U.S. merchants

By Alistair Barr

SAN FRANCISCO (Reuters) - Groupon Inc shares fell more than 8 percent on Wednesday, matching a record low of $4 at one point, on concern Hurricane Sandy will temporarily dent demand for the company's daily deals.

The U.S. Northeast is beginning a recovery that may take awhile, after the historic storm crippled transportation, knocked out power for millions and killed at least 64 people with a massive storm surge that caused epic flooding.

Small businesses in affected areas, such as New York City and New Jersey, are probably struggling to open, making it unlikely they will consider running a Groupon deal any time soon, said Sameet Sinha, an analyst at B. Riley & Co.

"Daily deals are not top of mind for many merchants right now," Sinha added.

A Groupon spokeswoman said the company's markets in the Northeast will be "opt-in" for businesses "for the immediate future."

That means previously scheduled deals with merchants will be postponed unless the businesses contact Groupon to confirm they still wish to run the offer, she explained.

Groupon shares were down 8.3 percent at $4.098 in afternoon trading on Wednesday. The stock hit $4 earlier in the day, matching a record low set in September.

"We're mindful of the significant strain Sandy has brought to our merchant family," the Groupon spokeswoman added. "We are also calling merchants in affected areas to check in and offer our assistance as possible."

Groupon is accepting donations to Accion East and Online, an organization that makes microloans to small businesses. All of the money donated through Groupon will go to loans to help local business owners recover from Sandy, funding things like reconstruction, equipment purchases, inventory replacement and additional working capital, according to Groupon's website.

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Unaiz Kabani of daily deal tracker Yipit said Sandy "almost certainly" had an impact on Groupon sales in states hit by the storm.

However, Groupon is now a large, multi-national company and the affected areas represent a relatively small proportion of its overall business, he added.

(Reporting By Alistair Barr; Editing by David Gregorio)