What happens when smart and wealthy short sellers get to publicly voice their case for betting against a company? Well, generally skepticism comes up and pressures the shares. That is the case for Splunk, Inc. (NASDAQ: SPLK) on Monday.
Zack Buckley, who manages Buckley Capital, was speaking about the negative value case today at the Value Investing Congress. In his speech he called this a Sell ahead of its IPO lockup expiration date which iw only two weeks away. At issue is that some 31 million shares or so will suddenly be available for sale.
Buckley also said that venture backers as well as the chief financial officer and chief executive officer have sold off about 10% of their holdings lately. While the lockup expiration creates an overhang in the stock, Buckley also talked about how Splunk has a weak operating model that does not distinguish between product offerings in a highly competitive environment.
As far as just how negative Buckley is, he said that he could see the stock value drop by 65% to 85%. Keep in mind that its market cap is about $3.4 billion as of now. Splunk shares are down about 4% at $35.30 against a post-IPO range of $25.15 to $39.75.
It is worth noting that Splunk was not just a hot IPO. It was sizzling. The company priced 13.5 million shares at a price of $17 per share, but the first range was $8 to $10 per share and then it was raised to $11 to $13 per share before going off at the higher price. The moist recent short interest report as of September 14 from NASDAQ showed that some 2.66 million shares were short and that represented 4 days to cover at the time.
JON C. OGG