Investing

Insider Action: Expiring Quiet Periods, Lockups for Week of 7/26

After a company files for an initial public offering (IPO), company executives typically embark on a “roadshow,” meeting with big investors and brokerages to tout the virtues of both their company and the stock. Once the stock begins trading, however, the company and its staff enter what’s known as a quiet period, during which they may not talk about the company or its stock. The quiet period lasts 40 days.

Special-purpose acquisition companies (aka SPACs, or blank-check companies) that combine with a start-up to come public in a reverse merger play by different rules. The U.S. Securities and Exchange Commission (SEC) treats these deals as mergers, not IPOs, and often there is no quiet period at all.

Most investment banks that underwrite IPOs do not issue research, including projections, on the company for a period of 25 days. This is done by custom more than by regulation, but the SEC and the courts appear to be satisfied with the length of the underwriters’ quiet period. When these reports finally are made public, they usually reinforce all the reasons the underwriter chose to participate in the IPO in the first place.

A similar restriction applies to company employees (insiders) who may be prohibited from selling any shares they may own for a time, generally between 90 and 180 days. For SPACs, the lockup period typically lasts between 180 days and a full year. A lockup period is not mandated by SEC rules but is set by the company in its IPO registration and is intended to keep insiders from flooding the market with shares and, in so doing, eroding the share price.

For the week ending July 30, 18 companies had the 25-day underwriter research quiet period end, and another eight will see the insider lockup periods expire.

Here’s a look at two of these companies coming out of their lockup periods. Qualtrics International Inc. (NASDAQ: XM) completed its IPO on January 28 and its lockup period ends Wednesday. The IPO price was $30 a share, and the stock closed at $45.50 on its first trading day. The stock opened Wednesday’s trading at $39.57.

Shoals Technologies Group Inc. (NASDAQ: SHLS) also began trading on January 28. The IPO price was $25 a share, and the stock closed its first day of trading at $33.00. At Wednesday’s opening bell, the stock traded at $26.99.

Among the 18 companies for which the 25-day underwriter quiet period expires this week is the Chinese equivalent of Uber: DiDi Global Inc. (NYSE: DIDI). The company completed its IPO on June 30. Shares were priced at $14 and opened for trading at $16.65, before closing at $14.14. The stock has been pummeled since the Chinese government ordered the company’s app to be withdrawn, followed by rumors of a big fine or even a de-listing of the shares on foreign exchanges. The stock opened at $8.03 a share on Wednesday morning.

Following is a list of the seven company lockup periods that ended or will be ending this week.

Company Ticker Industry
Crown Electrokinetics CRKN Electronics
Shoals Technologies SHLS Alternative Energy
TRX Insurance Brokers TIRX Insurance
ZIM Integrated Shipping ZIM Transportation
Vinci Partners VINP Financial Services
Ortho Clinical Diagnostics OCDX Healthcare IT
Qualtrics International XM Enterprise IT

Employees and executives who have vested stock options may now begin selling those shares.

Here are the 18 companies for which the underwriter quiet period expires this week.

Company Ticker Industry
Better Choice BTTR Consumer
Dingdong DDL Transportation
DiDi Global DIDI Transportation
Clear Secure YOU Security
Aerovate Therapeutics AVTE Biopharma
SentinelOne S Securite
Intapp INTA Enterprise IT
CVRx CVRX Medical Devices
Xometry XMTR Ecommerce
Integral Ad Science IAS Digital Media
LegalZoom LZ Software
Pop Culture Group CPOP Entertainment
Krispy Kreme DNUT Consumer
Torrid Holdings CURV Consumer
Acumen Pharmaceuticals ABOS Biopharma
EverCommerce EVCM Enterprise IT
Glimpse Group VRAR Digital Media
Eco Wave Power WAVE Alternative Energy

Note that Better Choice is traded over the counter.