Friday, February 14, 2014

First Twitter restricted stock unlock is upon us

The first wave of Twitter (TWTR) restricted stock unlock is about to occur, like this coming week (February 18, 2014). As per the SEC registration for the stock:
  • beginning as early as February 15, 2014, up to an aggregate of 9,867,228 shares of our common stock that are held by our employees who are not executive officers may be eligible for sale in the public market in order to satisfy the income tax obligations of such employees resulting from the vesting and settlement of the outstanding Pre-2013 RSUs for which we expect the service condition will have been satisfied on such date and through the end of the lock-up period (or up to an aggregate of 3,282,859 shares of our common stock held by our employees who are not executive officers if we choose to undertake a net settlement of all of these awards to satisfy a portion of such income tax obligations); and
  • beginning 181 days after the date of this prospectus, the remainder of the shares of our common stock will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144, as described below.
The SEC registration (S-1):
 
Tuesday, February 18, 2014 will be the first day that those unlocked shares can trade. Monday is a holiday (Presidents' Day.)
 
Sure, a fair number of Twitter insiders and investors will be tempted to sell their unlocked stock to lock in gains and to pay for taxes, etc., but the daily trading volume for Twitter is fairly high (12 to 22 million shares a day), so those sales could be lost in the noise of the normal, frenetic trading of TWTR. Or, there should be a short-term dip that could turn into buying once the initial impact of the unlock is out of the way.
 
My strategy? Wait and see, and be prepared to buy more on any major dips (15% or more.) I might try some option plays as well since I option-enabled my accounts, including a new account I opened with TradeKing ($4.95 trades.)
 
The 181 day lockup expiration will be a different matter since a much larger number of shares will be in play. There are a total of 544,696,816 shares. Only 70 million were sold in the IPO. That's 181 days from the original registration date of November 4, 2013, which would be May 4, 2014.
 
-- Jack Krupansky

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