Groupon Stock Rises Amid Potential Sale Rumors

Alibaba is rumored to be a potential suitor

Patrick Martin
Jul 9, 2018 at 9:52 AM
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Groupon Inc (NASDAQ:GRPN) stock is up 12.4% to trade at $4.90 this morning, after reports that the online discounter is exploring a sale, with company executives reportedly contacting a number of public firms to gauge interest in recent months. The report also indicates Chinese e-commerce giant Alibaba (BABA), which owns nearly 6% stake in Groupon, could be a potential suitor. 

As such, the stock is on track for its best day since February 2017. The move has the shares testing their 160-day moving average, a trendline that has served as resistance since mid-February, save for a massive post-earnings move back in early May. Despite the big rise today, GRPN is still trading below its year-to-date breakeven point of $5.10.

A short squeeze could keep the wind at the security's back, though. Short interest increased by 27.4% in the two most recent reporting periods to 41.3 million shares. This represents 10% of GRPN's total available float, and nearly a week's worth of pent-up buying power, at the equity's average pace of trading. 

In the options pits, calls have been the trend. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.22 ranks in the 8th annual percentile, meaning short-term speculators are more call-heavy than usual among options expiring in the next three months. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) confirms a substantial call bias, with long calls roughly quadrupling puts in the past 10 days.

Furthermore, now is an affordable time to buy GRPN options. The stock's Schaeffer's Volatility Index (SVI) checks in at 38%, which registers in the 5th percentile of its annual range. In other words, near-term options are pricing in relatively low volatility expectations at the moment.


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