Nearly five months after the company’s historic initial public offering, shares of Snap Inc. (SNAP - Free Report) dipped below $13—a 23.5% depreciation from their IPO price—for the first time on Wednesday morning.
After closing at $13.10 per share on Tuesday, SNAP quickly slumped about 1.7% to a new all-time low of $12.88 per share in morning trading hours. The move comes just a few days after the first phase of the company’s post-IPO lockup expiration, which many investors feared would send the already-struggling stock even lower.
When a company goes public, its early investors and employees with equity are barred from selling their shares for a certain period of time in order to provide some stability in what can be a volatile stretch for a young stock.
Over the weekend, the first phase of this lockup expired, meaning that a plethora of new shares could hit the market this week. While we don’t know the exact number of new shares available, JPMorgan estimated that about 400 million shares would be freed up after this lockup phase.
And the post-lockup headache might get worse for Snap, which is set to see another wave of shares become available on August 14.
Of course, just because several hundred million new shares can be sold doesn’t necessarily mean they will be. With SNAP touching new lows seemingly every day, there’s sure to be plenty of insiders who are willing to wait for the stock to recover before cashing in at all.
But these are human beings we are talking about, and that means the lockup expiration most likely resulted in some new shares out on the market. One need only to remember the simple laws of supply and demand to understand why this might have a negative impact on the company’s share price right now.
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