May Day Looms Large For Groupon
By ROLFE WINKLER
Wall Street Journal
December 28,2011
A summer of IPO love risks turning into a winter of shareholder discontent.
Some initially popular initial public offerings from May and June have disappointed. Now, expirations of lockup periods could prove a stumbling block to their recovery. Many of these companies limited their initial share sales in order to support the offering price. The problematic flip side is a relatively large chunk of shares potentially hitting the market now.
Lockups typically expire 180 days after the IPO. The latest example is vacation-rental company HomeAway. It sold nine million shares, or 11% of those outstanding, in its June IPO. Its lockup period expired Monday, when another 18 million shares became eligible for sale. The remaining 54 million shares can be sold starting in February.
True, HomeAway's stock popped 11% on Tuesday, although that could prove a fleeting technical fillip. A high proportion of the free float has been borrowed by short sellers, who may be buying stock to recognize gains after shares fell 42% the prior two months. The stock remains 19% below its initial price.
Much-hyped LinkedIn's shares have fallen 11% since its lockup ended in late November. The potential float roughly doubled to 18 million shares, about a fifth of those outstanding. And 56 million more shares should be eligible for sale starting in February when an extended lockup agreement expires.
Meanwhile, Pandora Media saw its potential float increase by a factor of nearly nine earlier this month when its lockup expired. Shares haven't reacted much, perhaps because they've already fallen nearly 40% below their IPO price.
Looking ahead, Groupon and Zynga shareholders have lockups expiring on May 1 and May 28, respectively. Shareholders, already suffering lackluster performance, will have to mark their calendars.
Write to Rolfe Winkler at rolfe.winkler@wsj.com
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