Snap Inc (NYSE: SNAP) traders expecting
volatility surrounding the beginning of a massive lock-up expiration period Monday were not disappointed, as the stock whipsawed up
and down throughout the session. However, Snap bulls hoping that the lockup would mark the bottom for Snap stock haven’t gotten
what they hoped for just yet.
After trading as high as $13.98 and as low as $13.10 Monday, Snap finished the session down another 1.0 percent. Shares headed
lower again by 2.1 percent on Tuesday morning.
The Lockup
Over 400 million restricted Snap shares became unlocked for the first time Monday. Another 782 million shares will be unlocked
in two week’s time. By the end of August, the total number of snap shares that will be available for trading on the open market
will increase by 86 percent.
Theoretically, this unlocking should be a negative for the stock, as the market gets flooded with Snap shares. However, Snap
stock was already down 40 percent in the three months headed into the lockup, so bulls were hoping that the expiration was already
priced into the stock.
Sell The Rumor, Sell The News
So far, that optimism hasn’t been rewarded.
“If you were selling Snap ahead of the lock-up expiration, you were making money. If you were selling it on the actual
expiration you were making money here too as the stock continues to go lower,” Benzinga PreMarket Prep co-host Dennis Dick said on Monday’s show. “The expiration is
officially over here, and it looks like there’s going to be some more sellers here in the market.”
Related Link: Paul
Meeks, Mark Mahaney Talk Snap's Lockup Expiration
From Bad To Worse
To make matters worse for Snap bulls, the S&P 500 decided this week to exclude companies that issue multiple stock share
classes, a group that includes Snap.
“Companies with multiple share class structures tend to have corporate governance structures that treat different shareholder
classes unequally with respect to voting rights and other governance issues,” the S&P 500 said in a statement.
The ban prevents Snap from inclusion in a huge number of S&P 500 funds representing trillions of dollars of global
investment capital.
Unfortunately, lock-up expirations have played a big role in lackluster initial returns of a number of high-profile tech IPOs in
recent years. Eight out of the 10
largest technology sector IPOs of all time declined between 25 and 71 percent in the year after their market debut.
At last check, shares of Snap were down 3.07 percent at $13.25.
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.