The increase in supply should be reflected in a company's stock price before the lock-up ends. (The additional supply of shares isn't expected to be removed.)īy contrast, in a fully rational market such increases in supply should be anticipated. Thus, we might expect that on or around the lock-up expiration date, there would be a price drop that isn't expected to reverse. Other things being equal, increased supply puts downward pressure on prices. Angie's List ( ANGI) saw its lock-up period expire this week and promptly plummeted 16 percent in its biggest decline since the stock was listedīasic logic tells you that share prices will drop once additional holdings are available.Groupon ( GRPN) fell 10 percent on its lock-up expiration day.LinkedIn ( LNKD) dropped about 7 percent at one point when its lock-up period expired.Recent experience tells us to expect a drop on the first day of trading: Of course, should you decide to sell, you also have to wonder what will happen to the price of your stock once these shares hit the market. This would mean selling shares so you don't hold a significant percent of your financial assets in your employer's stock (or any other individual company's stock, either).ĭoes the lock-up's expiration affect the stock price? Could you live with seeing everything you've worked for vanish if something happens to the company, or should you instead take money off the table and diversify your assets? Regular readers of this blog know how strongly I advocate diversifying all your assets (including your labor capital). Why LinkedIn stock isn't a good bet Facebook insiders can sell stock as "lock-up" endsĪlthough the temptation may be strong to bet heavily on your company, you have to look at the other side of the equation and decide if the risk is worth it. Facebook: Why most IPO investors strike out
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |