Tech Companies and ExactTarget and Technology

Lock-up expiration looming for ExactTarget

August 29, 2012

Shares of Angie's List and Facebook were battered earlier this month immediately after the expiration of their lock-up agreements, the bans that prohibit insiders from selling their shares right after a company goes public. That’s something tech firm ExactTarget would like to avoid on Sept. 17, when its lock-up agreement expires.

On Tuesday, the Indianapolis-based marketing software firm filed a registration statement for a proposed follow-on offering by stockholders that would pave the way for them to sell once the lock-up expires. Pricing details were not disclosed.

ExactTarget went public last March at $19 a share, raising $161.5 million. The stock soared to a first-day close of $25.11. Lately, its shares have traded at just under $21. Among the largest shareholders of ExactTarget is Palo Alto, Calif.-based Technology Crossover Ventures, with 22 percent, or 14.5 million shares.

Post-IPO tech stocks have run into a buzzsaw lately after their lock-ups expired. Shares of Indianapolis-based consumer review website operator Angie’s List are down nearly 30 percent, trading at around $9.50 in recent days, compared to just prior to the lock-up’s end. On the other hand, Angie’s competitor Yelp in trading Wednesday morning rose about 20 percent after it lifted a ban on stock sales by its large investors. The San Francisco company had a 67-percent earnings jump in the second quarter.

ExactTarget may shake off the lock-up expiration, as well. The company, which counts Microsoft and Xerox among its clients, earlier this month beat analysts’ second quarter loss estimates and grew sales by 42 percent. Its loss fell to $2.6 million, or 4 cents a share, vs. an 8-cent loss forecast by analysts. ExactTarget upped its 2012 revenue estimate to a range of $277 million and $280 million from a prior forecast of $270 million to $273 million.

So-called lock-up agreements ensure insiders and early investors don’t dump their holdings during an IPO. The restriction on stock sales typically lasts up to 180 days. Some experts say tech stocks are especially vulnerable to lock-up expirations because many issue a smaller percentage of their stock during  the IPO than other companies. Many tech stocks also have higher valuations than non-tech stocks relative to cash flow and other key measures, critics complain.

"The price of our common stock could decline if there are substantial sales of our common stock" by insiders, ExactTarget states in its registration. "We have a small public float relative to the total number of shares of our common stock that are issued and outstanding."

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