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Legal Limits on Sales by Insiders...read and weep shorts...
Sunnyvale, California, Oct. 14 (Bloomberg) -- Redback Networks Inc. shares fell 4.2 percent after the maker of networking equipment said company insiders were freed to sell a third of its stock earlier than planned.
The shares fell 5 11/16 to 129 3/8. Redback, whose shares had risen sixfold since they were first sold in May, fell 6.8 percent yesterday.
Insiders who were prevented from selling shares for 180 days after the initial stock sale now can sell as many as 12 million starting Monday. Redback, which has about 37 million shares outstanding, freed them to sell 6 million shares twice before, on July 27 and Aug. 31.
``That's a lot of stock to come out,' said Gina Sockolow, a Brean Murray & Co. analyst with a ``strong buy' rating on Redback stock. ``It could trade down for days.'
Redback said after the close of regular U.S. trading yesterday that Morgan Stanley, Dean Witter & Co., which underwrote its offering, would release the shares from a lock-up agreement. Such agreements protect new investors by forcing insiders to hold shares until a certain date.
Sale Limits
Sales will be limited by U.S. securities law. It prevents any one insider from selling in a 90-day period more than 1 percent of the shares outstanding, or the average number of shares traded per week in the four weeks before a sale, whichever is greater.
``We think only 3 million or 4 million will be sold,' Sockolow said.
Sunnyvale, California-based Redback makes a device that blends data traffic from digital subscriber lines or updated television cables. The product is popular with companies delivering fast Internet access to homes and small businesses.
Redback yesterday said its third-quarter loss narrowed to $1.62 million, or 4 cents a share, from $2.58 million, or 44 cents, a year earlier. Sales jumped to $20.6 million from $2.9 million.
The company asked for the early release to let insiders whose compensation is largely in stock options sell some of their holdings, Sockolow said.
In an effort to keep the stock from dropping, ``they time it for good news,' she said.
Oct/14/1999 16:46
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