The lock-up period of Snap Inc., which owns the social media platform Snapchat, is over. And the markets expect investors of the first hour and insiders to sell their shares.
In the pre-market trade, Snap was already 3 percent lower, and that remained after the start of the regular session. In total, stockholders may sell 400 million shares if they wish. The expectation is that many of these investors and employees will sell their shares.
A bad sign, because in the way that would be seen as a sign of distrust of these insiders. Especially now when Snap is already at its lows. There was an increase on the first trading day in March of this year but those gains have now been reversed to a steady decline. Snap closed Monday at $13.67 while it went to the stock market for $17 and climbed to over $24 on that day.
But since then the selloff has been experienced. The first quarterly figures released by the company in May also caused a big blow in confidence. There are some doubts: Can Snap grow the number of users fast enough? And is the plan for advertisers strong enough?
Snaps since IPO
Investors’ confidence has in any case disappeared a bit and an insider’s sale would mean a new dent in trust. Certainly, if they do not want to keep the shares at such a low price.
Yet, strategist Jim Strugger does see opportunities for investors in Snap. He points out that other social media who went to the stock market struggled with the same problems. Facebook, Twitter and LinkedIn were 24 percent lower than the IPO price around the end of the first lock-up period, but recovered within three months.
“Notably, LinkedIn, Twitter and Facebook all bottomed within a week of their lockup expirations, a bias that points to getting directionally long SNAP down here,” noted MKM derivatives strategist Jim Strugger.
“Often you can see these lockup expirations be more of a bottoming event for stocks rather than a negative event,” Michael Graham of Canaccord Genuity said on Monday. “There’s a lot of negative sentiment going into an event like this and in this case it will stretch out for several weeks. It does take some time, usually, for the shares to get into the market. I think the more important thing for Snap is to show some execution when they report next Thursday.”