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

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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


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,

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TheStreet Recommends

Smith & Wollensky Group


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


put my money where my mouth is.

Here's the list for this week:

Michael Falbo is an analyst for, a Boulder, Colo.-based research boutique (now a wholly-owned subsidiary of specializing in the analysis of equity syndicate offerings. This column is not meant as investment advice; it is instead meant to provide insight into the methods of new and secondary offerings. Neither Falbo nor his firm has entered indications of interest in any of the companies discussed in this column. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Falbo appreciates your feedback at