Snap Inc SNAP 0.07% traders expecting volatility surrounding the beginning of a massive lock-up expiration period Monday were not disappointed, as the stock whipsawed up and down throughout the session. However, Snap bulls hoping that the lockup would mark the bottom for Snap stock haven’t gotten what they hoped for just yet.
After trading as high as $13.98 and as low as $13.10 Monday, Snap finished the session down another 1.0 percent. Shares headed lower again by 2.1 percent on Tuesday morning.
The Lockup
Over 400 million restricted Snap shares became unlocked for the first time Monday. Another 782 million shares will be unlocked in two week’s time. By the end of August, the total number of snap shares that will be available for trading on the open market will increase by 86 percent.
Theoretically, this unlocking should be a negative for the stock, as the market gets flooded with Snap shares. However, Snap stock was already down 40 percent in the three months headed into the lockup, so bulls were hoping that the expiration was already priced into the stock.
Sell The Rumor, Sell The News
So far, that optimism hasn’t been rewarded.
“If you were selling Snap ahead of the lock-up expiration, you were making money. If you were selling it on the actual expiration you were making money here too as the stock continues to go lower,” Benzinga PreMarket Prep co-host Dennis Dick said on Monday’s show. “The expiration is officially over here, and it looks like there’s going to be some more sellers here in the market.”
From Bad To Worse
To make matters worse for Snap bulls, the S&P 500 decided this week to exclude companies that issue multiple stock share classes, a group that includes Snap.
“Companies with multiple share class structures tend to have corporate governance structures that treat different shareholder classes unequally with respect to voting rights and other governance issues,” the S&P 500 said in a statement.
The ban prevents Snap from inclusion in a huge number of S&P 500 funds representing trillions of dollars of global investment capital.
Unfortunately, lock-up expirations have played…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
