Freed from lock-up

Will investors race to sell? Not likely.
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The lock-up period for four Wall Street-traded Israeli companies is ending in February. For six months after a company floats shares, substantial shareholders are prohibited from selling. The end of a lock-up usually results in pressure on the share. But in this case, all four companies have taken a beating on the markets. Their shareholders are unlikely to hare for the floor to celebrate their freedom from lock-up.

The to-be-freed quartet are

Compugen

(Nasdaq:CGEN), which hit the public arena in July-August 2000,

Precise Software Solutions

(Nasdaq:PRSE), which completed its secondary issue in November 2000,

RadView Software

(Nasdaq:RDVW) and

Precise Software Solutions

(Nasdaq:PRSE).

End of lock-up

Company

IPO price in $

Price today in $

O/S
shares
(millions)

Floating
shares(millions)

Main
shareholders

February 5, 2001

RadView

10

2

17

4

Shai Beilis
Formula Ventures
Yehuda and Zohar Zisapel
North Bridge
CA
Sadot R&D

February 6, 2001

Mind CTI

10

7.8

20.5

3.5

M. Eisinger
ADC Teledata
L. Salansky
Summit Ptnrs

February 7, 2001

Compugen

10

7.5

25.2

5

Clal Biotech
D. Haselkorn
Israel Seed
J. Medved
P. Young
Apax
Evergreen

February 15, 2001

Precise

26.4

29.2

28

15

Mofet
JPV
Star
Giza
GE Capital
Advent
Gemini

The regulations governing the sale of shares by substantial shareholders are complex. Shareholders are subject to the restrictions laid out in rule 144 of the Securities and Exchange Commission. The first restriction relates to the period that the shareholder has owned the shares. To sell shares, the law stipulates a minimum period of a year from the date of paying in full for the shares. This restriction does not apply if the shares were bought on the market, but there are others.

Another restriction says that a shareholder can sell up to 1% of his holding at any time, or, a volume of shares not exceeding 1% of the stock's average daily turnover in the month preceding the sale.

If shares are listed on the OTC Bulletin Board or Pink Sheets, the restriction relating to the average daily turnover does not apply.

Sometimes traders sell shares before the lock-up ends, specifically in order to pick them up right after the lock-up at a cheaper price.

But sometimes substantial shareholders have no intention of getting out.

Take

Mind CTI

(Nasdaq:MNDO). It isn't afraid of pressure on the share as the lock-up ends. On the contrary, says CFO Elad Naggar, it welcomes the end of the lock-up, hoping that trade volumes will rise from its average in the last three months of 25,000 shares a day.

As for Compugen and RadView, they probably shouldn't fret. Compugen is 25% below its IPO price and RadView is 80% down from its price at first offering, which was $10. Neither need fear that investors will race to sell their stock at a fraction of what they paid.