Why Groupon Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of daily deal merchant Groupon were flying off the shelves today, climbing as much as 25%, on an essentially unexplained buying spree. Bloombergreported the jump may have been a result of speculation of a buyout from Google .

So what: In what could be a short squeeze, meaning shorts have rushed to cover their positions, there have been two high-volume spikes in Groupon shares today. The first sent the stock up about 5% around 11 AM, and the second pushed it up 7% between 2:10 and 2:15 PM. Meanwhile, the stock has added smaller gains throughout the day. Options trading has also been especially heavy today, with more than 4,000 $4.50 December calls trading hands.

Now what: Today's rally seems mostly driven by day traders looking to make a quick buck on one of the more volatile stocks in the market. Shares of Groupon had bottomed out a month ago, at $2.60, after another poor earnings report, but have battled back since then as a potential value play and on rumors that CEO Andrew Mason would be forced out. For long-term investors, today's events should be ignored, because they are not representative of any change in the company's expected performance.

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The article Why Groupon Shares Popped originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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