Hi Linda..
SCMR, I 've been trading like crazy, holding a small position outside of trading account and while the trend remains through this mess and until broken, will hold.
Still watching the volume, as long as we see increases with price/volumee cool,,decreasing volume with rising price, might be time to bail...decreasing volume with price stability buyers holding on...
all subject to the might forces of the market...
regarding lockup (repost from another board) FWIW!
When that stock gets unlocked, snap it up
Six months after a stock hits the market, insiders can sell
some of their shares in a lockup release. This often means a dip -- and a
second chance to buy a hot new stock. Three to watch: Sycamore,
SonicWALL and Metalink.
By Michael Brush
Want a good deal on an initial public offering (IPO)? Then simply wait six
months before you buy.
That's how much time investment bankers usually make big-money backers
wait before cashing out of an IPO. Once set free from these so-called lockup
agreements, investors often sell with a vengeance, driving a stock price down
and creating a good buying opportunity.
At least three companies look like they are quite
likely to bounce back from selling linked to
upcoming lockup releases -- because they have
excellent earnings revisions reflecting strong
fundamentals. They are Sycamore Networks (SCMR, news, msgs),
SonicWALL (SNWL, news, msgs) and Metalink (MTLK, news, msgs). Before
we get to more details on these broadband players with solid revisions, let's go
over the basics of the lockup release.
What is a lockup?
Investment bankers who bring a company public don't like to see its stock drop
a lot following the IPO. That makes it harder for the sell-side analysts on the
other side of the brokerage to place the next deal. So the bankers put a clamp
on the after market by banning big holders -- like venture capital backers,
executives or directors -- from selling.
Once they are set free, usually after 180 days, they can drive a stock price
down as much as 20%. But nothing has really changed. So this can be a good
time to buy. What's more, the whole event can be positive in the long term.
"This can help the stock run up even higher, since the float gets bigger which
means more institutions can hold the shares," says Bruce Rauner, of GTCR
Golder Rauner LLC, a Chicago-based venture capital firm.
You can find out about upcoming releases at the Web site IPO Lockup.com.
To do your own research, visit MoneyCentral's section on SEC Filings and look
at forms 424B, S-1, S-2 or S-3; companies file with the U.S. Securities &
Exchange Commission when they go public or do a follow-on offer. (Search on
"lockup" or "shares eligible for future sale" to get to the right place in the
document.)
How to unlock potential profits
Here's a strategy to consider:
Pick winners. Sounds obvious, but remember this: Never use releases
to get into stocks you know little about, or stocks that have poor
prospects. Just because a stock goes down due to a release does not
mean it will go back up.
Think small. Lockup releases won't have an impact on giants like Intel
(INTC, news, msgs). Focus instead on stocks with market capitalization
below $3 billion and trading volume of less than 3 million shares a day.
It can help to run a "sensitivity index" created by dividing the number of
shares set free by the average trading volume. A higher number is
better. Also, compare the amount of stock being released to the number
of shares outstanding. Generally, a lockup release of anything under
500,000 shares is not going to have a big effect, no matter what the size
of the float or trading volume.
Keep an early vigil. Lockup agreements are often the subject of huge
battles between venture capitalists and underwriters. If the venture
capitalists (VCs) complain loudly enough, they get let out early. So
start watching the price action a few weeks before the scheduled
release.
Look for the classic pattern. In this scenario, you'll see a clear spike
in volume and a drop in the price on the first day. The lowest price
comes about five trading days after the release begins. Selling
continues through day eight, and then backs off. Often a stock will trade
down on light volume ahead of a release, because everyone knows it is
coming. Track several lockups to get a feel for how they work before
acting on them.
Promising lockup releases
Sycamore Networks
A relatively new arrival to the networking scene, this Massachusetts-based
company makes optical equipment expected to play a major role in reducing
network congestion. The company's products offer more bandwidth and
flexibility to the telecom carriers responsible for seeing that signals make it
across today's congested Synchronous Optical Network, or SONET.
Sycamore's main optical transport products, SN 6000 and SN 8000, help
carriers use their existing SONET infrastructure more efficiently by allowing
them to create new optical channels, or rings. This lets carriers add capacity
or speed without doing an expensive upgrade. The products also reduce the
number of stops an optical signal has to make by increasing the distance it
can travel before it gets weak and needs regeneration.
Another product, called SILVX, is a network manager that helps carriers
provision end-to-end data bandwidth connections more quickly. Later this year,
Sycamore plans to introduce an "intelligent optical switch," known as the SN
16000. This will help convert SONET from a ring-based system to a more
efficient mesh network. Analysts expect demand for these products to drive
more upward revisions and a 50% annual growth rate in the medium term.
Trading at around $86, Sycamore shares have backed off considerably from the
high of around $199 reached in early March, four months after coming public.
But the stock could get even cheaper on June 11, when about 38% of
Sycamore shares are scheduled for release from lockup. Around 94 million
shares will be let out, compared to an overall base of 244.5 million shares.
Average daily trading volume is about 3.5 million shares.
SonicWALL
As more and more smaller companies venture into e-commerce, they will be
turning to SonicWALL for protection against malevolent hackers. Based in
Sunnyvale, Calif., this company is the leading vendor of Internet security
appliances offering firewalls, virtual private networks and content filters to small
businesses, schools and libraries.
With DSL (digital subscriber line) and cable modem broadband access
becoming more widely available to businesses, demand for SonicWALL
products should keep picking up. International Data estimates that
SonicWALL's part of the security market (products under $10,000) will grow
88% a year to over $1 billion by 2003, from $4 million in 1998.
To be sure, SonicWALL's market is intensely competitive. But users keep
coming back because the company's plug-and-play products are relatively
cheap (about $500 to $3,000) and easy to use. Would-be rivals also find
SonicWALL's network of over 2,000 distributors to be daunting. Meanwhile, the
big security players like Cisco Systems (CSCO, news, msgs), Check Point
Software Technologies (CHKP, news, msgs) and Axent (AXNT, news,
msgs) think this end of the market is too small to bother with, says Sandy
Harrison, of Pacific Growth Equities.
Analysts are looking for revenue upside from SonicWALL because of new
features like traffic provisioning, a product aimed at Internet service providers
called Global Management System, and a chipset version of its products.
Related Site
Find out about upcoming
releases at IPO
Lockup.com.
SonicWALL went public last November and traded as high as $133 before
settling in the low $60 range. About 46% of the company's shares are
scheduled for release from lockup on June 14. That's 11.6 million shares,
compared to a total of 25.4 million shares outstanding. Typical daily trading
volume is around 350,000 shares. These shares probably won't hit the market
until July, however. That is because executives hold them, and the company
blocks sales in the last month of a quarter through two days after earnings are
released.
Metalink
Founded by a former Israeli defense researcher, this Tel Aviv-based company
designs the high-performance chips that make DSL broadband access hum.
Having conquered a 70% share of the European market for high bit-rate DSL
(HDSL) chips used to provide broadband access to business, Metalink now
has its sights set on North America.
It is off to a good start, with customer wins like Newbridge Networks (NN,
news, msgs), Copper Mountain (CMTN, news, msgs) and Tut Systems
(TUTS, news, msgs). Metalink president and chief operating officer Francois
Crepin estimates the company has about 18% of the U.S. market. In Europe,
which accounted for more than 70% of revenue, clients include the major
telecom providers in Britain, France and Germany. Customers like Metalink
chips because they are cheaper and use less power, even though they perform
better.
Metalink, meanwhile, is developing more advanced chips for high-bandwidth
apps like voice and teleconferencing over DSL. "We are very aggressively
involved in the next generation of products," says Crepin. A very high bit-rate
DSL (VDSL) chip should be out next year. The company is also working with
several equipment makers to design cutting edge chipsets like HDSL2,
symmetric DSL (SDSL) and SDSL2, also known as G.SHDSL. Sell-side
analysts have price targets in the $60 to $70 range.
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Metalink, which went public in December, traded as high as $73 earlier this
spring before pulling back into the low-$30 range. The company has a lockup
release scheduled for June 20, linked to its March 22 follow-on offer. That will
unleash 56% of the outstanding shares, or 10.4 million shares compared to
18.4 total outstanding shares. Typical daily trading volume is around 450,000
shares.
So mark your calendars, but remember that all lockup periods do not result in
stock declines, and sometimes the decline comes well before or after the
lockup period ends. Maybe insiders actually like the stock. Or perhaps the
options behind the shares set free aren't vested. Releases are often timed with
positive events like earnings or some other news story, allowing big
shareholders to sell into the enthusiasm without pushing the price down.
For whatever reason, releases may have little or no impact on a stock. This
makes it risky to use them for short selling. Going long for a quick trade can
be a gamble, too. Some external market event can tank a stock just as the
lockup-release selling is finishing. It may sound ho-hum if you were thinking of
using lockups to make a quick buck, but often they are best used to get a
good price for a long-term position.
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