Shares of Talend(TLND) - Get Report have risen 32% since the company went public in July, but the price may fall once insiders are able to sell their restricted shares for the first time on Jan. 25 when the lock-up period expires.
This provides risk-tolerant investors with a compelling short opportunity ahead of the lock-up expiration.
Talend is a solid company that had a stellar initial public offering, with a first-day return of 41.7%, after pricing at $18 a share, above the initial range of $15 to $17. Since the IPO, Talent shares peaked at $34.49 and are trading now at about $23 each.
The joint book runners of the Talend IPO were Barclays, Citigroup, Goldman Sachs and JPMorgan Chase. William Blair was a co-manager of the offering.
Pre-IPO insiders and shareholders, comprising five companies and 19 individuals, own more than 10 million restricted shares, though the size of Talend's IPO offering was 5.3 million shares. If these pre-IPO insiders and shareholders decide to sell even a portion of their holdings when the lock-up period expires, the market could get flooded.
Risk-tolerant investors should establish a short position in shares of Talend over the next week, as it is likely that anticipation over the lock-up expiration and not just the lock-up expiration itself will spark selling in the short term. Keep in mind that average daily trading volume is relatively light, and it would be best to build this position in lots over several trading days.
Investors should cover their positions in the one to three sessions after the lock-up expiration date.
Based in Redwood City, Calif., the company offers its proprietary platform, Talend Data Fabric, to integrate applications and data across Big Data, the cloud and traditional business applications to make these more easily accessible for companies.
The company has a global customer base that includes Citigroup, General Electric, Lenovo and Siemens.
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Talend's third-quarter earnings report was encouraging, with revenue of $27.4 million, up 40% from a year earlier, though it also reported a loss of $6.37 million. Revenue from subscriptions rose 44%, while revenue from Big Data and cloud solutions jumped more than 10%
Talend has a price-sales ratio of 6.81, slightly higher than the industry average of 5.
Although the company has a market capitalization of just $647 million, it still lists diversified technology giants Microsoft and Oracle among its direct competitors. These are valued at 5.9 and 4.4 on a P/S multiple basis, respectively
This article is commentary by an independent contributor. At the time of publication, the author was short TLND.