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Groupon shares plummet 10%

(Reuters) – Groupon Inc stock slumped as much as 14 percent on Tuesday on concern about increased competition, leaving shares of the largest daily deal company close to their $20 initial public offering price.

Groupon shares fell to as low as $20.03 in late morning action before recovering slightly. The company was the third-largest decliner on the Nasdaq.

Groupon raised more than $700 million in an IPO in early November.

LivingSocial, Groupon’s closest rival, announced plans on Monday to offer more than 20 deals with national merchants over the crucial Black Friday shopping period.

Daily deal companies often subsidize national deals, making them less profitable than offers run with local merchants. The national deals usually bring in lots of new customers, but pressure profit margins.

“In the last few days we’ve been hearing about LivingSocial stepping up promotions,” said Edward Woo, an analyst at Wedbush Securities. “The concern is that there will be much more competition for Groupon going forward.”

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