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Coupa Software Shares Down +20% Since IPO; How Will IPO Lock-Up Expiration Impact Shareholders?

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Coupa Software Shares Down +20% Since IPO; How Will IPO Lock-Up Expiration Impact Shareholders?

Coupa Software Inc (NASDAQ: COUP) shares opened trading at $38 on October 6. Since the closing price of its IPO debut day, the stock has lost over 24 percent. The company's enterprise software is disruptive in the total addressable market of $20 billion.

In all, the company issued a total of 8.51 million shares at $18.00 a share generating gross proceeds of $153.18 million. This included 1.11 million shares reserved for underwriters. The issue price was higher than the initial price range of $14–$16.

What Is The Lock-Period Expiration?

Normally after an IPO, there is a lock-up period of shares held by promoters or financial institutions. This period ranges between 90 and 180 days. That means those shareholders cannot sell their shares until the expiration of the period. The objective is to prevent the market from being flooded with additional number of shares immediately after the IPO, which could drag down the stock.

There is another reason for the lock-up period. Any sale by insiders could give lead to negative sentiments among investors regarding the prospects of the company. It is a normal practice for a share price to drop once the lock-in period expires.

Facebook Inc (NASDAQ: FB) may be the best example of this. After the first expiration of 90 days, there were 271 million more shares available in the market. That led to a lifetime low price of $19.69, which was nearly half the price of IPO.

Coupa's Insider Trading

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On October 21, Jim Cramer expressed his view that the stock could drop down to around $21–$22 levels and that he would remain a buyer at those levels.

At last check, the stock traded down 1.08 percent at $25.05.

Latest Ratings for COUP

DateFirmActionFromTo
Nov 2020BerenbergInitiates Coverage OnHold
Oct 2020Deutsche BankInitiates Coverage OnBuy
Oct 2020BTIGAssumesNeutral

View More Analyst Ratings for COUP
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