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Investors sell out of IPOs early at record rates as stocks boom
By: Financial Times | January 24, 2022

A record number of US initial public offerings last year allowed founders and early investors to sell their shares before the end of the traditional 180-day waiting period.

In 2021, 25% of IPOs (91 in total) included early lockup period releases. according to Renaissance Capital. The data does not include uplists and crosslists of stocks from other exchanges. These totals were the highest in the period up to 2011 analyzed by the Renaissance. According to the company, by 2020, 9% (17 companies) had an early lockup period.

“It’s just soared,” said Avery Spear, a data analyst at the Renaissance. In 2021, two of the five largest IPOs in the United States included an early lockup release. Coupang, a Korean e-commerce business, and Nu Holdings, a digital banking platform in Brazil.

Although unregulated, the IPO’s 180-day lockup period is standard. Investors want executives to hold about two-quarters of the shares so that people can get used to the new company. In addition, investors are worried that executives may have information about companies that can be used by selling shares early.

The vibrant stock market has previously urged companies to break the 180-day lockup standard. In 2013, 26 US-listed companies Raised $ 7.4 billion from subsequent share sale According to Dealogic, it’s the most during the lockup period since the dot-com boom.

Gareth McCartney, Global Co-Head of Equity Capital Markets at UBS, said the popularity of ending the lockup period early is closely tied to stock market performance, and weaknesses in early 2022 will continue. Said that it may weaken the use of.

When IPO stocks soar after pricing, “the lockup is usually more generous because it’s done its job, so people focus on more liquidity,” he said.

Increasingly, the Renaissance found that disclosures detailing how lockup periods expire are becoming more complex.

If the stock price reaches the threshold, the expiration date can be a fluctuating target. “Often buried in complex legal terms, the actual number of shares released may be ambiguous,” Renaissance said.

“It makes it absolutely much harder for investors to track,” Spear said. “It’s not just a clean cut 180 days after the IPO.”

“Wait, why is there downward pressure on equities?” Surprised investors, “Benjamin Silverman, research director at Insider Score / Verity Data, which tracks insider trading.

“If you are sensitive [stock price] Swinging like that is serious and you can be surprised, “he said.

Heather Hasson and Trina Spear, co-founders of Figs, which manufactures stylish medical scrubs, announced $ 156 million in company stock in September after the company’s lockup period ended early due to stock performance. I sold it.

Fig’s largest external shareholder, Tulco Holdings, sold $ 256 million in the same offer in September. For Hasson and Spear, the sale of shares “gave them the opportunity to gain some liquidity after creating billions of dollars in value for fig shareholders,” the company said in a statement. Neither co-founder had sold its shares at the time of the IPO.

Fig’s share price closed at $ 20.96 on Friday, falling below the company’s IPO price of $ 22 per share and soaring to $ 50 per share after listing.

Record numbers of early lockup IPOs do not include mergers or direct listings with special purpose acquisition companies (Spacs).

Brian Armstrong, CEO of cryptocurrency company Coinbase, sold more than $ 290 million worth of shares on the first day of its trading after its direct listing in April.

Coinbase shares fell more than 50% from the average price of Armstrong’s stock sales as Armstrong’s stock plummeted at Bitcoin prices.

In December, eight months after the sale of shares, Armstrong bought a $ 133 million home in the Bel Air district of Los Angeles. The house was first owned by Seagram’s heir Charles Bronfman, the Wall Street Journal first reported. Coinbase declined to comment on Armstrong’s sales.

“You are cynical and can say [founders] “If stock prices are rising, additional stock sales will help improve liquidity without hurting former investors,” McCartney said.

Investors sell out of IPOs early at record rates as stocks boom Source link Investors sell out of IPOs early at record rates as stocks boom.

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