A flood of Snap Inc shares held back since the Snapchat owner’s initial public offering could start to trade freely next week, pressuring a stock that has already plunged far below its debut price.
Starting on Monday and extending into August, early investors, employees and other insiders at the Snapchat owner can sell shares for the first time since its $3.4 billion March IPO, the third-largest ever for a U.S. tech company.
That means the supply of stock on the public market could mushroom in a matter of weeks by hundreds of millions of shares from fewer than 200 million shares, reports Reuters.
Demand for Snap shares among investors is already meager after the stock hit five straight record lows this week.
It has sunk nearly 20 percent below its $17 IPO price and is down roughly 50 percent from a record high reached shortly after its debut, dragged lower by investor concerns about user growth and waning confidence in its ability to eventually turn a profit.
“You don’t want to be caught in this wave of transactions that will impact the stock in some way,” said Philippe Collard, founder of Yabusame Partners, a management consulting firm specializing in the technology industry.
There is one corner of the market that does have use for the stock, as bets against Snap have become so popular that shares available for short selling are hard to come by.
Any shares sold by Snap insiders and employees would add to the supply and could fuel more short selling.
Snap also reports quarterly results on Aug. 10, another potential source of pressure. Its disappointing debut earnings in May prompted a 20 percent one-day nosedive in the stock.
“There’s likely to be a lot of caution and concern related to what the company will report and communicate,” said CFRA analyst Scott Kessler. “The company is taking some hits, starting to take on water.”
Snapchat is wildly popular with users under 30, but many on Wall Street are critical of its slowing growth. Snap has warned it may never be profitable, and Facebook Inc’s Instagram has been rolling out features that copy Snapchat.