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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: William T. Katz who wrote (699)	11/6/1997 9:08:00 AM
From: John Xu	Read Replies (2) \| Respond to of 164685

From www.briefing.com .... Amazon Lockup to end Nov 12 Daily commentary updated for November 6, 1997 When a company goes public, the underwriters (brokers selling the stock to the public) generally insist that major shareholders do not immediately sell stock in the public market. This helps the underwriters with their requirement to support the stock after the offering. This is called the "lockup" period and usually lasts about six months. Once the lockup is over, however, management and other insider shareholders can sell their stock. This can, at times, depress the price of the stock by increasing supply at any given price relative to demand. Amazon has a low float Amazon.com presents an interesting case with regard to the lockup period. Amazon went public on May 15 of this year, selling 3,000,000 shares in an IPO which now trade publicly. The total number of shares outstanding was and still is 23,860,000. The float, or stock available on the market, is thus very low relative to the total number of shares. This is common among IPO's, because a limited supply of stock for trading can help keep the stock price up. Stock has Gone Up as Concept Catches on In the case of Amazon, this might be particularly true, because it is trading on a future "concept" and not on current fundamentals. Earnings reports mean little, because they are not expected to earn a profit for several years anyway. However, every time the company announces a new deal for Internet distribution, demand for the stock increases. This is why, despite increasingly large quarterly losses, the stock has risen from an IPO price of $18 per share to $60 as of the close on November 5. Lockup Ends on 19 Mln Shares Soon, there might be more Amazon.com stock available for trading. The SEC documents that Amazon and other companies file when going public indicate just how much stock is owned by insiders who must not sell their stock during the lockup period. For Amazon, the major lockup period was for 181 days and covered 19,331,253 shares. In theory, this means that 19 million more shares could hit the market, compared to the current float of just 3 million. The lockup period ends on November 12. This is a large number of shares in a lockup relative to the current float. Insiders Might Sell Over Time Now, this does not in any way suggest that insiders will dump 19 million shares on the market in a week or so. Jeffrey Bezos, the man behind Amazon.com, owns 9,885,000 shares and John Doerr, of venture firm Kleiner Perkins, represents 3,401,376 shares (data from the prospectus). Neither is going to immediately sell large chunks of the stock. However, both must be tempted to take some profits given the run-up in the stock price. After all, this is a company that has a market cap of $1.5 billion now, but still is just a "concept," and Bezos stock is worth close to $600 million. Venture firms, meanwhile, are profit seekers that are not always in it for the long run. And, there are other management shareholders that could be salivating at the current $60 price. At some point, the major insiders are likely to want to "liquify" some of their holdings. Just an Observation on Our Part Briefing is not suggesting that Amazon stock will go down. Nor is it making any recommendation with regard to the stock. However, readers should be aware that the lockup period is ending soon, and that the potential exists for a lot of stock to be offered for sale over time. The amount coming out of lockup next week is very large relative to the current float.