I suspect that Saul would like to see other discussions here so we may want to end this one soon… Lockup expirations may or may not create opportunities to purchase shares at slightly depressed price but in the long term they are just a blip on the radar… Trade at your own risk
Personally, I find lockups interesting because the talking heads on TV sometimes push the potential of companies just before their lockup expiration (for example, NIO on 60 minutes) as if they’ve been paid to hold up the price. I truly believe that for a short time, (perhaps two weeks before and three to six weeks after), that most stocks will be fairly volatile due to an expiration event and that savvy investors ‘may’ find an excellent opportunity to purchase good companies at a reduced price.
This month’s lockup expiration for Elastic is a fairly typical example of a stock dropping prior to the lockup expiration and dropping a little more on the day of the lockup expiration (although only 25% of the locked shares became tradable this month). The next event may be slightly different because many of the insiders will have already had a chance to take some profits; assuming they have faith in their company they should be less likely to take additional profits immediately after their next block becomes tradable (of course, anything is possible).
Re: “The rest of the unlock occurs 4/2/2019. If the stock continues this weakness going into the event, it turn out to be a non-event. I have seen that happen before.”
April 2nd could be a non event but not necessarily for the reason you think. According to the company’s third quarter press release: “The lock-up restrictions with respect to all remaining shares are scheduled to expire after the close of the market on April 2, 2019. However, since the Company will be in its standard quarterly trading blackout period on that date, insiders will be restricted from selling shares until the start of the third trading day following the end of this blackout period.”
I’m not sure if that implies that the new block won’t be tradable until April 5th or if it means that the new block won’t become tradable until the third day after their next earnings date. Perhaps someone here with more knowledge on quarterly blackouts will let us know.
Re: “So what do the probabilities say?..not what you might have thought…often the price decline occurs leading into the release date and only minor drops on that actual day or the few after.M/B> This is likely because present holders aren’t gonna sit around and watch their stock get slammed when they can just buy right after.”
This matches with most everything I’ve read on the topic.
Thank you to Saul for allowing the discussions on lockup expiration to continue; again, I would advise folks to not create too many threads on this subject as we’ve already had part of this conversation before:
If someone here wants to really dig into the events surrounding lockup expirations the following paper examines thousands of them (note that all figures and charts are at the end so you might want to open two browser windows).
Duma gave links to a number of additional articles… Personally I like the following one because it takes a look at some of our favorite names including Okta and Alteryx.
Going beyond the recent lockup expiration, what concerned me a little bit about Elastic current price is how it has been trading this week. On Monday the market was showing a lot of strength and Elastic closed down a little (less than a dollar) but someone dumped shares in after hours causing the stock to open much lower on Tuesday. Today the market is showing signs of strength again and Elastic is down again. I’m not sure why anyone would dump in after hours unless they were expecting some negative news. I haven’t found some but I keep watching.
By the way, for those who like to see what the insiders are up to you can always look at the SEC filings on edgar. Here are some of the recent reports:
Kevin Kluge - SVP of Engineering
Steven Schuurman - Director
Hmm, that’s about it… so far