Box is trading at record-low levels on Tuesday, dropping another 5%, to around $US14.60 a share.
Box shares have declined nearly 22% over the past couple of weeks, and has wiped out most of its gains since its January IPO when it priced its shares at $US14 a piece.
Box was one of the most anticipated — and scrutinised — tech IPOs of the past year. On the day of its IPO, the stock opened above $US20 and closed at $US23.23, up 66% from the IPO price.
What’s driving the shares down?
According to several Wall Street analysts, the problem has been the recent stock lock-up expiration that took place on July 22. Companies typically have 90 day or 180 day lock up periods when they go public, preventing shareholders from selling stock immediately after the IPO.
The July lock-up expiration allowed some of the largest Box investors to unload their stock for the first time, causing the number of shares on the market increase and the share price to drop. Another round of insider selling could come in September, when Box executives and employees have a chance to sell their shares.
“Some of the pressure on the stock has obviously come with the lock up and incremental shares coming to market,” Pacific Crest’s senior analyst Rob Owens told Business Insider. “There has been no other news flow to suggest why it would be down like it is.”
Instead, Owens said it creates an opportunity to buy Box at a lower price, as he wrote in a recent note:
“While the lockup expiration could still affect shares over the coming weeks, we believe much of the perceived risk is accounted for in shares and view the current opportunity as compelling from a risk/reward standpoint. We are upgrading our rating to Overweight with a $US24 price target, and would be buyers of BOX.”
Raymond James analyst Terry Tillman also pointed out that the fundamentals of Box’s business has been solid, following a strong earnings report last quarter.
“Fundamental-wise, I can’t think of anything. The billings were strong last quarter and the stock reacted well,” Tillman said. “The last fundamental news they had besides the last earnings was their strategic relationship with IBM.”
In June, Box announced a big partnership deal with IBM that would let the two companies work much more closely selling and building their products. At the time, Box CEO Aaron Levie touted it as, “the biggest partnership we’ve done in terms of how comprehensive it is across the product portfolio of IBM.”
Box’s plunging stock price and the insider sales are sure to raise questions about the company’s prospects. It’s never a good sign to see some of your biggest shareholders sell out, which could be perceived as a reflection of losing faith in the company they invested in.
But some stock owners, including former employees, said they’re not particularly worried about the stock volatility or the health of the company. “Being in Silicon Valley, volatility is something we’re used to. Personally, I’m not worried, I think there’s a really bright future for Box,” one former Box employee told us.