As a requirement of bringing a company public, the underwriters usually require existing stockholders to lock-up their shares for a period of time. During the lock-up period, they cannot sell their shares. When a lock-up expires, a large block of shares can suddenly bcome tradeable. This can result in a decline in the stock price if these shares are traded. It's a matter of supply and demand. The supply of stock suddenly increases with the demand constant. This can produce a decline in stock value.
However, if these stocholders are holding for the long term, then these shares stay out of the market. Hence a lock-up expiration does not necessarily mean that the stock price will decline. In fact, when a lock-up expires and the stock price does not decline, it is a very good sign for the company. It signals that insiders believe in the long term future of the company and are holding.
NBIX had their IPO in May of 96. May 22, I think, I may be off a few days here. They had about 9 million shares locked-up. But, there was an unusual stipulation. One third of the locked-up shares, 3 million, became available for trading after 180 days, another third after 270 days and the final third after 360 days.
The first two lock-ups have expired. They passed without a drop in NBIX stock value or a large number of registrations. This is an excellent sign for NBIX. The last lock-up of 3 million shares will expire in mid May. If these insiders decide to sell, NBIX value will decline at that point. However, the first two lock-up expirations were uneventful. So, I would guess that this one would be also.
John de C |
