The Lockup Dip and Bounce

This week, I want to introduce you to something that I refer to as the "lockup dip." What exactly does this term refer to?

Well, the anticipation of a lockup expiration can make investors very nervous. Nobody knows how the stock will be affected because it's impossible to read the minds of restricted shareholders. But investors must be prepared for it either way.

This uncertainty creates tension around the stock. And as traders begin to hedge their bets, stock prices tend to go down right up until the expiration.

Once the lockup expiration has passed, though, the stock can begin functioning on its own merit once again. This whole process often causes stock prices to dip ahead of an expiration, and then rebound after the lockup has come and gone.

In general, lockups are an excellent way to gauge investor sentiment on a stock. If a stock slides without bouncing after the expiration's passed, it's a good sign that investors may be losing confidence in the stock. But if a stock rebounds immediately after the expiration, this is an indication that the stock is stronger then sellers perceived.

On Nov. 19, Smith & Wollensky Group(SWRG) will be unlocking slightly more than 4 million shares, a little less than half its total shares outstanding. Unfortunately, the stock hasn't had much luck being publicly traded and has seen its stock price decline since the IPO.

Having grown up in the restaurant business, I know how hard it can be to keep a good restaurant going, let alone expanding, and in this case, I wouldn't put my money where my mouth is.

Here's the list for this week:

Lockup End	Deal Name		Released	Outstanding
11/17/01	PEABODY (P&L COAL HOLDINGS) (BTU:NYSE)		30,200,000	51,900,000
	Lehman Brothers	SEC Filings	58.19%*	News
11/19/01	SMITH & WOLLENSKY RESTAURANT GROUP (SWRG:Nasdaq)		4,172,235	9,354,447
	CE Unterberg Towbin	SEC Filings	44.60%*	News
Source ipoPros.com			* Released shares as a percentage of outstanding.

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