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Biotech / Medical : Biotech Lock-Up Expiration Hell Portfolio -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (395)	9/2/2001 1:06:02 PM
From: keokalani'nui	Respond to of 1005

Eyes on Seattle Genetics as 'lockup' ends By Drew DeSilver Seattle Times business reporter This is a big day in Seattle Genetics' short history as a public company. When the Bothell-based biotech firm sold stock to the public in March, company executives and financial backers agreed not to sell their Seattle Genetics shares for six months. Those agreements expire today. Such "lockup" agreements are virtually universal when a company goes public and are common when two firms merge in a stock-for-stock deal. Lockups reassure outside investors that insiders won't immediately bail out of the company, and by artificially restricting the "float," the number of shares available to ordinary investors, the agreements can support the stock price. But all bets are off after the lockup ends and insiders are free to sell their shares. That's especially true for a company such as Seattle Genetics — more than three-quarters of whose 29.3 million shares have been locked up until now. (Six venture firms own more than half of Seattle Genetics shares.) Or take Loudeye Technologies, a Seattle-based company that went public in March 2000 and had a phased-out lockup. From the first unlock date — Sept. 10 — to the end of the year, insiders registered to sell nearly 2.3 million shares, half again as much as the pre-lockup public float. Loudeye shares, which were priced at $16, followed the typical surge-and-fallback pattern of many recent tech IPOs but still traded above $12 before Sept. 10. After that date, however, the stock began a steep dive; it was below $7 by the end of the month, below $2 by the end of the year and cl A recent study of nearly 2,000 initial public offerings (IPOs) by two Pennsylvania State University researchers found that trading volume increased sharply — and prices fell — for most stocks in the days just before and after their lockups ended. After-lockup volume was 40 percent above pre-lockup volume, Laura Casares Field and Gordon Hanka said. The three-day return for unlocking shares — measured by comparing the price the day before the lockup ended and the price the day after it ended — was consistently 1.5 percent worse than a broad market index. The poor results persisted. Both effects were far more pronounced when venture capitalists were involved, the researchers said. Three-day returns of venture-backed companies were 2.3 percent below the index, compared with 0.8 percent for nonventure-backed ones, and trading volume was five times pre-lockup levels. That, the researchers said, suggests that venture firms and their investors sell more aggressively after their shares are unlocked than do company insiders. Most recent IPOs, of course, have been funded by venture capital. And a spot-check of several Puget Sound-area IPOs over the past 18 months bears out Field and Hanka's findings. <snip> Drew DeSilver can be reached at 206-464-3145 or ddesilver@seattletimes.com. Copyright © 2001 The Seattle Times Company