Snap’s share lockup ends next week, which probably won’t be a good thing for the company.
The end of a lockup means early investors, employees and other insiders have their first opportunity to sell shares since Snap went public in March. If a company is doing well, this time usually offers it a boost. But if a company is faring poorly—as Snap currently is—this moment typically impacts the firm negatively.
Shares of Snap are down almost 20 per cent below their IPO price. The company raised $3.4 billion at a valuation north of $20 billion. Insiders will be tempted to dump their stock ahead of Snap’s next quarterly earnings report on August 10, because a miss on any key metric could send shares tumbling even further.
Some investors can sell come July 31, but many employees won’t be able to share until August 14, which comes after the quarterly report. In total, there are more than a billion shares that will be freed as a result of the lockup period ending. Right now, around 13 per cent of Snap is on the stock market; by the end of August, that figure will skyrocket up to 97 per cent.
It is not guaranteed that this will negatively impact Snap’s stock, of course. But it does seem likely.
“If it’s a really weak story and it’s going down, the lockup is going to provide a catalyst for it to go down faster,” Brad Lamensdorf, a portfolio manager for AdvisorShares, informed Reuters.