Amid the boom in IPO stocks, one analyst is calling attention to lockup agreements on insiders selling Snowflake (SNOW) stock, due to expire in March. Snowflake stock will jump more than tenfold in outstanding shares at that time.
“The expiry of the lockup could weigh on share price accretion from here, as early holders sell and SNOW’s free float rises from 32.2 million to 345.8 million shares in March 2021,” Deutsche Bank analyst Patrick Colville said in a report on Friday.
He downgraded Snowflake stock to hold from buy. Snowflake is just one of many technology initial public offerings that have surged.
DoorDash (DASH) and Airbnb (ABNB) had their initial public offerings this week and jumped by double digits and triple digits, respectively. Other hot IPO stocks include Palantir Technologies (PLTR) and Unity Software (U).
Meanwhile, a Morgan Stanley analyst last week cautioned investors on Palantir stock because its lockup agreement expires in mid-February. Palantir sells data analytics software primarily to U.S. government agencies.
Snowflake Stock Is Biggest U.S. Software Offering
Snowflake, which sells cloud-computing technology for storing and analyzing data, went public on Sept. 16. The Snowflake IPO raised $3.4 billion and set a record as the largest U.S. software IPO ever.
“We continue to believe Snowflake is in the sweet spot for key secular trends of this decade: data driven decision-making and cloud adoption,” added Colville. “Yet, pent-up demand for high-multiple names, such as Snowflake, may be limited as we wrap up 2020 and investors look to protect their gains.”
In addition, Snowflake stock fell 5.2% to close at 353.96 on the stock market today. Further, Palantir stock edged up 0.6% to 27.20.
Snowflake stock has retreated from an all-time intraday high of 429 set on Dec. 8. Palantir stock has pulled back from an all-time high of 33.50 in intraday trading on Nov. 27.
Palantir stock holds a Relative Strength Rating of 98 out of a possible 99. Also, Snowflake stock owns a Relative Strength Rating of 82.
Lockup for IPO stocks generally ends in 90 or 180 days. The lockup prevents early shareholders and employees from selling shares in the first few months after an IPO. Shares in Uber Technologies (UBER) plunged in late 2019 as its lockup expiration approached.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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