Go share GroupOn for a massive discount

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Frank Sennett, "GroupOn the largest ever deal" author, offers you perspective on the daily company.

Shares of GroupOn are depressed, always Tuesday after the website latest result report showed that the strategy of the company is losing every day much momentum.

GroupOn was share price in recent times by 25 percent to $5.68, have hit an all-time low.

Investors are concerned about signs of slowness in the company daily offers advertising economy and international economic downturn such as GroupOn with Europe's economic problems concerned.

"Significantly faster than the company thought the daily business of the offers is slowed down," said Mark S. Mahaney, Internet analyst at Citigroup investment research, CNBC, adding that he did not expect to raise the stock price the basic operations of GroupOn.

"Until a stabilisation in our core business, the Commons will not go," he said.

GroupOn grew strongly, if it was a private company, by integrating local merchants with millions of everyday outreach on its website. The company went in early November and is one of a number of high-profile Internet companies-including names such as Zynga and Facebook, which have disappointed investors since their IPOs.

Since his debut in market late last year has GroupOn the share price fell 78 percent, as its offers daily business has faced increasing competition from Broncos and SocialBuy.

GroupOn tries now in new businesses such as consumer product sales and dealer services-to expand, which have much lower areas. The strategy puts GroupOn in direct competition with Internet heavyweights such as Amazon and eBay.

"they need to support the daily offers space, clearly before them these additional markets to go", said Frank Sennett, author of "Groupon the biggest deal ever," CNBC said.

The challenges that is faced with GroupOn in Europe that has to fight with slow economic growth, is a major concern, he added.

"[GroupOn] a good model in downtime, you want to be," said Sennett.

"If GroupOn does not do well, if people are looking for a bargain, that might be a pretty big problem," Sennett added.

Reuters contributed to this story.

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Lawmakers to grill Jamie Dimon on massive loss

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Mario Tama / Getty Images

JPMorgan Chase Chairman and CEO Jamie Dimon.

Updated at 7:30 a.m. ET: When JPMorgan Chase’s Chairman and Chief Executive Jamie Dimon appears on Capitol Hill later Wednesday he will reportedly talk down the risky trading practices that have led to massive derivatives trading losses at the bank.

Dimon will apologize for the bank’s mistakes, and he will say JPMorgan’s recent multibillion-dollar trading loss happened because poorly managed traders in January started an unwise hedging strategy they did not fully understand, according to reports of his prepared testimony for a Senate hearing into the trading disaster. He will also argue that risk is inevitable in the banking business.

“We will not make light of these losses, but they should be put into perspective,” Dimon is expected to tell lawmakers, according to a copy of his testimony published by The Wall Street Journal. “We will lose some of our shareholders’ money -- and for that, we feel terrible -- but no client, customer or taxpayer money was impacted by this incident.”

“We have let a lot of people down, and we are sorry for it,” Dimon is also expected to say.

In early May, Dimon revealed that a London-based section of the bank had lost $2 billion in a trading portfolio designed to hedge against risks the company takes with its own money.

That figure has since grown to $3 billion -- a massive loss for a single bank that has shocked Washington, Main Street and even Wall Street, and represents a big embarrassment for the bank, which unlike many of its rival institutions managed to come through the 2008 financial crisis relatively intact.

The losses are especially embarrassing for Dimon, who is known for his skills in the field of risk management, and also because he has been an outspoken opponent of the so-called Volcker Rule, which is supposed to prohibit banks from making speculative bets with their own money on a scale that could endanger both the institution and the financial system.

Dimon has insisted the bank’s botched trades were designed to hedge its overall risk, rather than simply to make profits. Lawmakers are likely to question that view when Dimon appears before them on Wednesday. They also could ask if the nation’s other big banks are still engaged in the risky trading activities that can lead to catastrophic losses.

They are also likely to mention the findings of a story in The Wall Street Journal Tuesday that showed some JPMorgan executives and directors were warned about risky practices by a team of London-based traders two years before botched trading cost the bank billions.

Mike Mayo, "Exile on Wall Street" author, weighs in on JPMorgan's huge trading losses.

“The question is will Jamie Dimon tell us the whole truth [tomorrow], because he hasn’t done so yet,” said Christopher Whalen, a senior managing director of Tangent Capital Partners in New York.

Whalen told CNBC lawmakers are likely to want to know when Dimon first became aware of the risks taken by Bruno Iksil, the man at the center of the trading disaster, who was nicknamed the “London Whale” for his risky trades.

When Iskil’s trading initially came to light, Dimon dismissed the press coverage as a “tempest in a teapot,” but now lawmakers are likely to want to drill down into the details of the trading activities at JPMorgan, and in particular those of the London-based team at the center of the controversy, and to understand the risks they took, Whalen said.

The big trading loss has sparked investigations from the FBI and the Securities and Exchange Commission, and it has also prompted shareholder lawsuits. Dimon has apologized for the losses, and he even warned that they are likely to grow, but he has also told shareholders that the bank is not in danger because the size of the losses are relatively small compared to JPMorgan’s operations.

In April, JPMorgan reported first-quarter 2012 net income of $5.4 billion, down from a net income of $5.6 billion in the first quarter one year before.

Whalen said another issue for lawmakers will be why regulators didn’t detect the extreme risks that JPMorgan traders apparently were taking.

Several representatives of the Office of Comptroller of the Currency, which is charged with supervising the international activities of U.S. banks, were detailed to JPMorgan in London.

“The examiners are supposed to follow the audit trail, in part; they have to go and check all of the significant operations of the bank,” Whalen said. “This as a very significant part of the bank, and it was growing. The exposures were growing.”

“What’s the point in regulation if they’re not going to be diligent?” Whalen continued. “That’s what we pay them for.”

For Dimon himself, there’s the matter of his position on the board of the New York Federal Reserve, which lawmakers say is a conflict of interest.

The New York Times has reported that, even though scores of federal regulators are stationed inside JPMorgan’s Manhattan headquarters, the Federal Reserve did not assign any regulators to the London office that generated the big trading loss.

Below, CNBC's Sue Herera reviews Dimon's prepared remarks for today's event.

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U.S. accuses bank of massive 'wash-trading'

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WASHINGTON — U.S. regulators are accusing one of Canada's largest banks of engaging in hundreds of millions of dollars in illegal futures trades to reap tax benefits on its holdings of company stocks.

The Commodity Futures Trading Commission filed civil charges Monday against Royal Bank of Canada, saying the bank made the sham trades with itself. The agency said it is the largest case it has brought against so-called wash trades, which cancel each other out. Royal Bank of Canada engaged in "a wash-trading scheme of massive proportion," the CFTC said.

In addition, the agency alleged that the bank concealed the true nature of the trades and made false statements to a futures trading exchange, OneChicago.

The CFTC alleged that Royal Bank of Canada made the trades in stock futures contracts from June 2007 to May 2010 at non-competitive prices with two foreign subsidiaries. The transactions weren't "at arm's length," as required by law, and as reported by the bank to the exchange, the agency said.

An arm's length transaction either is one in which the buyer and seller aren't directly related or one done at a price that would prevail if they were unrelated. The federal rules allow futures trades between companies and subsidiaries, but only if they are done on an arm's length basis.

Toronto-based Royal Bank of Canada called the CFTC's allegations "baseless" and said it will contest them in court. The bank said the trades had been vetted in advance by the CFTC and futures exchanges back in 2005 with no objections being lodged against them, and they were monitored for several years.

The CFTC is seeking a permanent injunction against the bank committing further violations of the federal commodities laws and rules, and unspecified monetary penalties in its civil lawsuit filed in federal court in Manhattan.

The CFTC said the bank's trading strategy was devised to gain Canadian tax credits on its holdings of U.S. and Canadian company stocks. The strategy was created and carried out by a group of executives at the bank. However, the agency's suit didn't name any individuals.

"Today's action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain," SEC Enforcement Director David Meister said in a statement.

Meister, questioned by reporters, wouldn't say whether related suits could be filed against individuals in the future or if the alleged misconduct by Royal Bank of Canada also occurred at other banks.

The buyer or seller of a futures contract commits to purchase or sell something at a specified date and price.

There were two types of futures trades the bank engaged in that corresponded to two different Canadian tax benefits, the CFTC said. One benefit allows Canadian companies that hold U.S. stocks that pay dividends to get a tax credit for the U.S. dividend tax they pay. The bank bought stocks in U.S. companies that it expected to pay dividends on certain dates.

As a hedge against risk, the CFTC said, the bank also sold single-stock futures contracts at the same time to a foreign subsidiary. The subsidiary sold the stock short, meaning it bet against the stock — borrowing shares, selling them and then buying them when the stock price falls and returning them to the lender, while pocketing the difference.

The net effect was a "wash," but the bank got a tax credit as a result, the CFTC said.

Another Canadian tax benefit allows Canadian companies that hold shares of other Canadian companies for more than a year to receive dividends tax-free for a year. In that case, Royal Bank of Canada bought baskets of Canadian stocks that it held for more than a year and also sold stock-index futures contracts as a hedge to another foreign subsidiary, the CFTC said.

"Before we made a single trade, we proactively contacted the exchange to seek its guidance," Royal Bank of Canada said in a statement. "These trades were fully documented, transparent and reviewed by both the CFTC and the exchanges, and for the next several years were monitored by them. RBC's trading was permissible in 2005, and it is permissible today under the CFTC's published guidance."

The bank said that since there was no objection in 2005, it is "absurd" for the CFTC to claim now that the trades were fictitious or wash sales.

The trades were engaged in by independent RBC entities with the intention of taking genuine market positions, in accordance with CFTC guidelines, the bank said. "They were executed at competitive market pricing and no market participants suffered any negative impact."

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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