3 ms·

> a shitload of shares about to become free trading, with a declining share price, you've got to think alot of employees are going to go stampeding to the exits

> a shitload of shares about to become free trading, with a declining share price, you've got to think alot of employees are going to go stampeding to the exits rather than holding > record short interest by the street This is double counting the same thing. The reason there's short interest is because there's a bunch of employees that would like to sell now but cannot. I suspect that much of these short positions will close out when the lock-up ends and employees sell into the market. I wouldn't be surprised if there weren't back-channel deals along the lines of "you short it now and close when my lockup period ends, and I'll use my locked-up long position to unofficially hedge for you".

module0000 9y ago
Unofficial(as in, one entity hedging for a separate entity) hedging is 1) illegal and 2) very inefficient and prone to screw you at tax time. But realistically... you know non-wealthy stockholders(ie employees) want to cash in, so you buy into the retail sell-off on lockup day, bid it up 3 points, then close when you see the other retail buyers chasing the rally. Closing several thousand long shares should be sufficient to run their stops, depress the price, and present you with another buying opportunity at or near your original entry price. All that said.. guessing what will happen with the market is how you lose your money, and fail at day trading before you ever got started.
- alasdair_ 9y ago
  If, say, a person owns $5MM of snapchat stock and their spouse knows this, can their spouse (acting rationally) not simply short or buy a put option for some portion of this? They didn't agree to anything in the RSU agreement and no long as the spouse wasn't acting on insider information and simply wanted to hedge, I'm not certain a crime would have been committed, unless the person owning the shares actually asked their spouse to perform this action.
  - module0000 9y ago
    On paper: yes, that sounds good. BUT, if the SEC comes knocking...they operate in a way that looks like "guilty until proven innocent", and having your spouse do it appears at first glance as guilty. The RSU agreement would be important to see though, they may have some bits about spouses and immediate family - or they may not(in which case what you described is 100% above board). If anyone holding RSU's is (legally) able to show the RSU agreement, it would be insightful to read.
whatok 9y ago
I don't know what their RSU agreement is like but typically you are not able to short your own stock.
- ThrustVectoring 9y ago
  That just makes the most obvious classes of "your actions cause a short position" not an option. Like, if you tell your cousin that you plan on giving him a certain number of shares when your lockup period expires, and he decides he likes the current price better and shorts it in advance, what sort of lock-up contract would prevent that? The cousin isn't an employee or their spouse so isn't restricted from shorting now, the promise to gift stock is extraordinarily unlikely to be prohibited (or even discoverable), and the gift itself is above-board.
  - whatok 9y ago
    So insider trading is causing 26% short interest?
    - ThrustVectoring 9y ago
      No, and I don't think I claimed it did? Mostly just that back-channel shorting would be extraordinarily tempting while subject to a lock-up. That, and you can't really keep employees from saying that they plan on selling stock when their lock-up expires, and you can't keep the lock-up period under wraps, so the market will try to estimate the size of the impending sell-off and get in front of it with short positions.
nemo44x 9y ago
> "you short it now and close when my lockup period ends, and I'll use my locked-up long position to unofficially hedge for you" That is illegal and most certainly not happening. Those shares aren't even available to short in fact. Yes, naked shorting does take place and shouldn't but that's nothing to do with this. This is fake news.

module0000 9y ago

Unofficial(as in, one entity hedging for a separate entity) hedging is 1) illegal and 2) very inefficient and prone to screw you at tax time. But realistically... you know non-wealthy stockholders(ie employees) want to cash in, so you buy into the retail sell-off on lockup day, bid it up 3 points, then close when you see the other retail buyers chasing the rally. Closing several thousand long shares should be sufficient to run their stops, depress the price, and present you with another buying opportunity at or near your original entry price. All that said.. guessing what will happen with the market is how you lose your money, and fail at day trading before you ever got started.

alasdair_ 9y ago
If, say, a person owns $5MM of snapchat stock and their spouse knows this, can their spouse (acting rationally) not simply short or buy a put option for some portion of this? They didn't agree to anything in the RSU agreement and no long as the spouse wasn't acting on insider information and simply wanted to hedge, I'm not certain a crime would have been committed, unless the person owning the shares actually asked their spouse to perform this action.
- module0000 9y ago
  On paper: yes, that sounds good. BUT, if the SEC comes knocking...they operate in a way that looks like "guilty until proven innocent", and having your spouse do it appears at first glance as guilty. The RSU agreement would be important to see though, they may have some bits about spouses and immediate family - or they may not(in which case what you described is 100% above board). If anyone holding RSU's is (legally) able to show the RSU agreement, it would be insightful to read.

whatok 9y ago

I don't know what their RSU agreement is like but typically you are not able to short your own stock.

ThrustVectoring 9y ago
That just makes the most obvious classes of "your actions cause a short position" not an option. Like, if you tell your cousin that you plan on giving him a certain number of shares when your lockup period expires, and he decides he likes the current price better and shorts it in advance, what sort of lock-up contract would prevent that? The cousin isn't an employee or their spouse so isn't restricted from shorting now, the promise to gift stock is extraordinarily unlikely to be prohibited (or even discoverable), and the gift itself is above-board.
- whatok 9y ago
  So insider trading is causing 26% short interest?
  - ThrustVectoring 9y ago
    No, and I don't think I claimed it did? Mostly just that back-channel shorting would be extraordinarily tempting while subject to a lock-up. That, and you can't really keep employees from saying that they plan on selling stock when their lock-up expires, and you can't keep the lock-up period under wraps, so the market will try to estimate the size of the impending sell-off and get in front of it with short positions.

nemo44x 9y ago

> "you short it now and close when my lockup period ends, and I'll use my locked-up long position to unofficially hedge for you" That is illegal and most certainly not happening. Those shares aren't even available to short in fact. Yes, naked shorting does take place and shouldn't but that's nothing to do with this. This is fake news.