Zulily (ZU) is the online apparel retailer that went public six months ago offering 13 million shares at $22 a share. Since topping out in late February at $73.50, the stock fell victim to a little thing called gravity and made a new low this morning at $28.75 on the heels of the company’s 6 month ipo lock up expiration. While many investors have TWTR’s lock-up fallout fresh in their minds from last week, I think it is important to note that there is no playbook for these events.
Look at today’s intra-day reversal in ZU, after opening down almost 10%, the stock has since ripped and is now up more than 10%!
ZU had a much smaller market capitalization (ZU at $4.4 billion vs TWTR at $20 billion) when the stocks went public a week apart ($22 for ZU on Nov 13th vs TWTR at $26 on Nov 7th) but since then, the stocks have had a very similar range:
Both stocks got very oversold following Q1 results that were less than stellar, but investors also knew in both situations that insiders and early VCs were also lining up their sell orders into the lock-up expiration, making for a perfect storm in an already jittery backdrop for high valuations stocks.
The next stock heading into the lock-up expiration meat-grinder will be FEYE, with 91 million shares coming unlocked Tuesday night to trade Wednesday. Last week, the WSJ had a scathing take-down of FEYE (Investors Shouldn’t Play With FireEye), detailing what appears to be nothing short of shady dealings with insiders selling in a secondary at much higher levels, then releasing poor earnings and guidance in front of an upcoming lock-up. Please watch the CEO’s interview on Fast Money last week, it was cringe worthy:
Is sentiment and the price action in FEYE so bad that it could be lining up for a good contrarian trade? Maybe, and as I said above, there is no playbook for these events. While FEYE’s 73% declines from the March highs seems enticing, it could also not stop until it round-trips back to its $20 IPO price from last September.