This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Short Trade: Supernus IPO Lock-Up

Stocks in this article: SUPN

BOSTON ( TheStreet) -- With the massive amount of attention surrounding the Facebook (FB) initial public offering, many new traders were introduced to the insider "lock up" -- the period of time, usually between three months and six months immediately following the IPO, during which insiders are not allowed to sell any of their shares. When the lock-up period ends, insiders are allowed to sell their shares into the open market.

Insider selling (or even fear of insider selling) upon a lock-up expiration can cause a stock to drop in value. Traders take note.

Supernus Pharmaceuticals (SUPN), a recent specialty pharma IPO, has 10 million shares set to be unlocked on Wednesday. The lock-up on Supernus shares actually lifted Monday but was delayed due to the markets being closed for the past two days.

If Supernus insiders decide to take profits, the stock price could drop quickly. Supernus trades with an average daily volume of only 62k shares. I'm short Supernus, betting on just such a drop in the company's stock price.

Supernus went public on May 1 at $5 per share. Since the offering, the FDA has approved two Supernus products -- Trokendi XR, a once-daily extended release formulation of topiramate, and Oxtellar XR, a once-daily extended release formulation of oxcarbazepine was approved. Both Trokendi and Oxtellar are extended release versions of two widely available generic drugs.

Today, Supernus shares have more than doubled in value to $10.95, offering ample incentive for insiders to sell a good chunk of the 10 million shares freed from the lock up. Ten million shares may not sound like much, but the block represents nearly 40% of Supernus' float. Outside of the lock-up expiration, there are no near-term catalysts for Supernus to drive the stock higher.

I can't guarantee that Supernus insiders are going to sell their shares this week, but larger paper gains since the May IPO and a volatile stock price suggests we're going to see some selling pressure.

One noteworthy risk to be aware of: Supernus can delay the expiration of the insider share lock-up by 18 days due to earnings or a "material event." Oxtellar was approved on Oct. 22 but it's not clear if the company has deemed this to be a material event for the purposes of delaying the lock-up. If it is, the lock-up expiration could be pushed back to Nov. 9.

Disclosure: Messier is short Supernus.

Mark Messier is the founder of Messier is a DOJ-certified Criminal Intelligence Analyst and former IT professional, specializing in law enforcement applications. In 2008, Messier began trading biotech stocks, using his analytical expertise to detect and capitalize on human and market patterns. Starting with only $2,200 in his trading account, he has booked over $400,000 in profit in just 4 years. In April 2010, Messier founded the subscription-based stock-trading web site to share his biotech trading ideas with the online investor community. Messier enjoys spending time with his wife and two young boys and visiting his "home away from home" in Costa Rica.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs