could be headed for an avalanche of insider selling.
In a securities filing late last week, the cloud-based data warehouse company disclosed that the huge run-up in its stock price following its initial public offering had triggered a provision in its lockup agreement with the company’s officers, directors, and early shareholders to allow a quarter of those holdings to trade.
Terms of the deal required that Snowflake (ticker: SNOW) trade 133% above the company’s $120 IPO price for at least 10 days in a 15-day period. That requirement was fulfilled on Dec. 29, and 37.9 million previously locked-up Snowflake shares will be free to trade on Thursday.
Note that the company issued 28 million shares in its September IPO. An initial tranche of previously locked-up stock became free-trading on Dec. 15.
Snowflake shares, while still well above the original IPO price, have come back a little closer to terra firma. The stock opened for trading on Sept. 16 at $245, then closed at $253.93. As recently as a month ago, the stock traded as high as $429 on an intraday basis, but it has since been gradually ebbing, closing on Monday at $278.24.
Snowflake has slipped about 14% since the first tranche of insider shares was freed up for trading.
In a research note Tuesday, Deutsche Bank analyst Patrick Colville repeated his Hold rating, cutting his price target on the stock to $335, from $270. He estimates that the additional shares to be freed this week will increase the free float in Snowflake shares by 87%.
“With Snowflake stock up almost 133% from its IPO price, we expect some investors to cash out as lockups expire,” he wrote. “This could weigh on share price accretion from here.”
But in trading Tuesday, Snowflake was actually up 1.6%, to $282.74.
Write to Eric J. Savitz at firstname.lastname@example.org