Haven't checked the numbers, but if it's true, shorting began in earnest because the cost to borrow went from 95% to (a still pretty obscene) 30%. At 95%, to make money on a year-long short the stock would have to drop to pennies. At 30%, it still needs to be a massive dog, but it's doable.

The sudden explosion in shorting caused by this drop in cost to borrow is probably seen as a negative signal and making some investors nervous, causing the stock to drop as they sell it off.

But the cost to borrow doesn't normally drop from 95% to 30% in the absence of a lot of newly-issued shares. So why did this happen? Someone must have made a large number of shares available to borrow - so the question here is who was it and why did they do it?

With the Groupon float so teeny, it's a lot easier to manipulate pricing. This could be completely straightforward and boring, but this could be an institution with advance notice of some favorable information about Groupon setting naive investors up for a classic short squeeze. (Good news comes out, some shorters panic and buy to cover their shorts, increased demand causes prices to rise, more shorters panic... iterate your way to a massive pop and a whole lot of severely-burned shorters.) This would be a good way to compensate for the inevitable drop when the lock-up period expires.

TL;DR - Don't buy or short individual stocks without fully understanding what's going on, and that goes beyond the fundamentals of the business.