Uber Technologies Inc (NYSE: UBER) is down another 13.3% in the past week as the stock endured heavy selling pressure surrounding its IPO lockup expiration on Nov. 6. New SEC filings have revealed one of the biggest sellers of Uber stock following the expiration was Uber founder Travis Kalanick.
Filings have revealed Kalanick sold 20 million shares of Uber stock last week worth a total of more than $546 million. Kalanick was dumping shares at price ranges of between $26.65 and $27.40.
Why It’s Important
Lockup expirations dramatically increase a stock’s float, or the number of shares that freely trade on the market. Prior to the lockup expiration, company insiders like Kalanick are forbidden from selling shares of the stock.
Lockup periods are often extremely volatile periods for stocks. How well the market digests the newly available shares can have a big impact on sentiment. If there is little selling pressure and/or the market digests the selling pressure without a significant drop in share price, traders can see lockup expiration as a potential bottom for a struggling stock like Uber.
However, if insiders dump a stock in droves following lockup expiration, it can be seen as a sign insiders believe a stock is overpriced or they are not confident in the near-term outlook for the company.
In Kalanick’s case, his aggressive selling may or may not be a bearish signal. Kalanick still owns about 75 million shares in Uber. While dumping 21% of his holdings in a matter of days certainly isn’t bullish, Kalanick still has a sizable $2 billion investment in the ride-sharing company. In addition, he may have planned to liquidate a portion of his holdings well in advance of the IPO just to free up some cash for other endeavors.
The only other company insider that reported significant selling last week was chief product officer Manik Gupta, who sold just over 15,000 shares.
The price at which Kalanick’s sales took place could potentially be the most troubling part of his lockup selling. Just six months after Uber’s IPO was priced at $45 per share, the founder was willing to unload his shares at under $27. Traders should keep a close eye on Uber insider trading in coming weeks to see if Kalanick’s sales are completed or if he will continue to cash out of his Uber holdings.
Uber's stock traded around $26.94 per share at time of publication.
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Photo courtesy of Uber.