Snapchat Inc. (NYSE: SNAP) stock fell almost 5% Monday as its IPO “lockup” term expired on Monday, dropping the shares to an all time-low since it’s launch back in March.Shares plummeted, hitting an all time low of $13.10 per share. Although the company was able to slightly recover from the damages later on, investors believe that this could mark rock bottom for the company. The stock first fell below its $17 IPO price in July and has been under tremendous pressure into this lockup expiration, down 22 percent in one month heading into Monday, according to CNBC.
Since its IPO on March 2, insiders including CEO Evan Spiegel have been barred from selling Snap shares. However, now, early investors and insiders including Spiegel, CTO Robert Murphy and Lightspeed Ventures will be able to sell up to 400 million shares now that the lockup period is over, according to a report by JPMorgan analyst Doug Anmuth.
Other employees will be able to sell up to 782 million, on top of the 400 million, by Aug. 14. By the end of August, over 97% of Snap’s stocks will be eligible to be sold.
MKM strategist Jim Strugger noticed that many of the other social media companies, such as Facebook or LinkedIn, had a similar pattern just like Snap’s during the time of the lockup expiration.
It seemed to be a trend among social media companies
"Notably, LinkedIn, Twitter and Facebook all bottomed within a week of their lockup expirations, a bias that points to getting directionally long SNAP down here," noted Strugger.
Snap had a disappointing first earnings back in May, mainly due to the fact it was being compared to Facebook. It only recorded 8 million users during that quarter, compared to Facebook having 59 million users globally.
Share prices can move dramatically when lockups expire. For example, Twitter shares fell 18 percent on the day of a key lockup expiry in May 2014, and in November 2012, Facebook jumped 13 percent on its lockup expiry, according to Reuters.
"Often you can see these lockup expirations be more of a bottoming event for stocks rather than a negative event," Michael Graham of Canaccord Genuity told CNBC's "Squawk Alley". "There's a lot of negative sentiment going into an event like this and in this case it will stretch out for several weeks. It does take some time, usually, for the shares to get into the market. I think the more important thing for Snap is to show some execution when they report next Thursday."
It’s not clear whether the stock may jump back or not, but investors will seem to be sticking around and waiting to see if the tech company has an accelerated growth and begins to rise again.
ome analysts project that this could be a buying opportunity. They say that the amount of advertising and growing users on the social media app could cause it to grow even more in the near future.