Graphs show that the drop started on Monday morning. On Friday afternoon a piece of news appeared that LivingSocial is about to raise a $200M round to strengthen its position as a competitor for Groupon. More recent rumours say that the round may actually be much higher than that, backed by some big names, and the cash would go to the company and not to investors (http://blogs.wsj.com/venturecapital/2011/11/22/livingsocial-...). So this may have influenced investors mood to some degree, maybe enough to make a spark so to speak, which probably was the opportunity that short sellers were expecting to start making big bets. It's just an assumption, but it could make sense.
According to an earlier Reuters analysis, Groupon shares are very attractive for shorting because the company is losing money, had issues with accounting, unproven business model, and may face stiff competition (http://www.reuters.com/article/2011/11/14/us-groupon-shortse...).
My personal experience is that LivingSocial offers are more interesting, and Groupons are often redundant. Most notably, some Groupons look like steals or desperate sales, while others are fairly banal (and useless).
Meanwhile LS's offers are usually fairly constant in terms of discount, and focus on areas I find more interesting.
This must have something to do with the quality of script/process that LS's sales folk are working with.
According to an earlier Reuters analysis, Groupon shares are very attractive for shorting because the company is losing money, had issues with accounting, unproven business model, and may face stiff competition (http://www.reuters.com/article/2011/11/14/us-groupon-shortse...).