Handicapping a Stock's Post-Lockup Moves

You never get a second chance to make a first impression, and nowhere else is this more true than with an IPO.

Alliance Data Systems(ADS), a Dallas-based provider of transaction services, is first in this week's lineup. It went public on June 7 and saw a 16.7% gain on its first day. Not bad, considering that the underwriters reduced the price range and the share size before the IPO. The stock behaved better throughout the day, though, and closed at the day's high of $14.

I love seeing an IPO ramp up during the first trading day, because it shows that people have confidence in it and that serious buyers are involved. Right now, ADS is trading at $17.35, more than 40% above the issue price of $12. Normally you'd expect insiders to sell after the lockup expires, following a rise like that, but because the company is largely owned by a partnership, there probably won't be much selling.

Every once in a while, a deal comes along that does not live up to the hype. Take Torch Offshore(TORC), for example, which provides subsea construction services for offshore oil and gas drillers. At first, the offering had some pretty decent buzz around it, and the company managed to price the deal at the top of its $14-$16 price range. This is usually a good sign that the stock is in better shape than expected.

The stock opened at $18.11 and quickly saw a high of $19. At this point, things were looking up, but a downfall was soon to follow. Just after the high, the stock began to lose ground and ended up closing at a low for the day at $16.35, leaving the day with only a slight gain of 4%. I wish I could say that this was as bad as it got: The stock is trading below $5 right now. Locked-up shareholders will most likely look elsewhere for their holiday spending money.

Finally, let's take a quick glance at United Surgical Partners(USPI). (I'll do a more in-depth analysis next week.) This deal performed much better than expected. The health care company priced 9 million shares at $14, the middle of the price range.

At this point, we were conservative with companies in the health-related fields and rated the deal "hot," but not a highflier. We were pleasantly surprised. The deal traded up 29.4% for the day, closing at $18.12.

When a deal can build on its price throughout the day, this is a good indication that the stock isn't just hype. United Surgical is currently trading at $16.48, still significantly above its IPO price, and the number of insiders is fairly large. In this case, I wouldn't be surprised to see some selling after the lockup expiration.

Here is the list of lockup expirations for this week:

Lockup End	Deal Name		Released	Outstanding
Dec. 4	Alliance Data Systems (ADS:NYSE)		58,566,067	73,838,426
	Bear Stearns	SEC Filings	79.32%*	News
Dec. 4	Torch Offshore (TORC:Nasdaq)		8,333,333	13,333,333
	UBS Warburg PaineWebber	SEC Filings	62.50%*	News
Dec. 5	United Surgical Partners International (USPI:Nasdaq)		10,139,768	24,285,083
	CS First Boston	SEC Filings	41.75%*	News
Dec. 8	General Maritime Ship Holdings (GMR:NYSE)		29,000,000	36,999,780
	Lehman Brothers	SEC Filings	78.38%*	News
Dec. 9	Willis Group Holdings (WSH:NYSE)		123,651,774	147,112,631
	Salomon Smith Barney	SEC Filings	84.05%*	News
Source ipoPros.com			* Released shares as a percentage of outstanding.

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