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Some Twitter employees will soon be able to trade in their Twitter shares for cold, hard cash.
On Saturday, a shareholder lockup will expire that will free up nearly ten million non-executive employee shares for trading, according to filings with the Securities and Exchange Commission. It is the first time since the company went public last fall that employees will be able to sell their shares on the public market.
Shareholder lockups typically last for the first six months after a company is publicly listed, a method to insure share price stability during the first few months of trading. Often, when a lockup expires, the company’s share price drops as a result of a number of new shares flooding the market — if, that is, employees elect to sell their shares.
Note that we saw a small drop in Facebook stock after the first of its initial lockups expired in October of 2012. But upon a second, massive lockup expiration in which upward of 800 million shares became available, Facebook shares rallied more than 12 percent in November 2012 trading. The social network is currently trading at around $67 per share, nearly double that of its IPO price.
Upon Twitter’s first lockup expiration, however, far fewer shares (around ten million) will be potentially up for sale, compared to Facebook’s first lockup, which freed up around 270 million shares. That may safeguard Twitter from any major fluctuations in share price.
But it won’t protect Twitter from recent investor sentiment; the company’s stock dropped more than 14 percent since it reported its fourth-quarter earnings in February. For the first time, investors saw the extent of Twitter’s slowing user growth problem, dampening initial investor optimism.
I’d imagine, as a Twitter employee, it stings to watch your company lose billions in market cap just days before you’re able to first cash out.
Twitter’s real date to watch is May 6, when the rest of the company’s 470 million shares will be free to trade after a second lockup expires.
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