Why Shares of Zulily Inc Dropped and Then Popped

Is this meaningful? Or just another movement?

May 14, 2014 at 2:03PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Zulily Inc (NASDAQ:ZU) were on a wild ride this morning, opening 10% lower and then surging as much as 14% higher than yesterday's closing price after its lockup period expired today. 

So what: Trading volume soared as insiders were allowed to sell shares for the first time since the flash-sales retailer's IPO six months ago -- nearly five times the average daily volume of shares had been sold by noon today. Over a million shares changed hands at market open, presumably as insiders dumped their holdings, but the stock quickly rallied after that on an apparent short squeeze. With Zulily's short interest at 63%, a majority of the market has been betting on the stock to fall, and those short-sellers were waiting to take advantage of the expected sell-off from the lockup period expiration, as posts on Twitter indicate. Once the market opened, the shorts began to cover their positions and take profits as the stock opened at its lowest point since the IPO.  

Now what: For Zulily shareholders invested for the long-term, today's movement is essentially noise. Short-sellers can take control of a stock and drive day-to-day fluctuations in its price, but ultimately the stock will rise or fall based on the company's underlying profits. Similarly, investors in recent IPOs should be aware of their lockup expiration dates, which generally come six months after the IPO, as the end of a lockup can trigger a sell-off -- though as a one-time event it shouldn't affect the long-term direction of the stock. Even before today's swing, the stock has been highly volatile, spiking in February to over $70 on an earnings beat and then falling to less than $30 this morning. With the stock's sky-high P/E ratio and a huge short interest, about the only thing shareholders are assured of is more double-digit swings like today's.

Looking for your next multibagger? This stock could be it.
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

 

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers