As much as a quarter of new shares sold in Snap’s IPO could go to long-term investors who will be required to hold the stock for a year, the company said in a regulatory filing Monday.
Snap is looking to raise as much as $US3.2 billion this week by selling 200 million shares for $US14 to $US16 each. The filing states that 50 million shares are expected to be subjected to the so-called lockup period.
Snap’s IPO is the biggest tech offering since Alibaba Group’s September 2014 share sale. Allocating big blocks of shares to large mutual funds or even corporate investors is one way to ensure a large stock sale’s success.
In exchange for a guaranteed block, the big investors may agree not to dump the stock — though Snap’s filing says it may waive the lock-up requirement. Snap’s IPO was already oversubscribed by at least $US6.8 billion heading into the weekend, Business Insider reported.
It is expected to set a price for its shares on March 1 and begin trading on March 2. The company could raise the price for its shares, or increase the number of shares it’s planning to sell, before Wednesday.
Here’s the excerpt from Snap’s filing (emphasis added):
“We expect approximately 50 million shares of our Class A common stock purchased by investors in this offering will be subject to a separate lock up agreement with us providing for a restricted period of one year following the date of this prospectus.These agreements will reduce the number of our shares available for sale in the public market during their term.We may, in our sole discretion, waive any of these lock up agreements before the restricted period expires.”
A spokesperson for Snap declined to comment.