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Why Olo Stock Traded Sharply Lower on Wednesday

By Danny Vena – Sep 8, 2021 at 12:32PM

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Early investors can now sell their shares. But will they?

What happened

Shares of Olo (OLO 0.44%) were trading sharply lower on Wednesday morning. The lockup expiration for early investors and insiders has arrived, meaning they are now free to sell their shares.

Olo's stock had fallen as much as 15% in early trading on Wednesday. As of 11:48 a.m. EDT today, the shares had recovered somewhat and were down 5.7% compared to Tuesday's closing price.

A young family ordering food delivery via a mobile app on a smartphone.

Image source: Getty Images.

So what

Investors will recall that Olo, a software-as-a-service company that provides online ordering technology to the restaurant industry, had its initial public offering earlier this year. Olo, which is shorthand for "online ordering" debuted on the public markets on March 17.

In regulatory filings with the Securities and Exchange Commission, Olo said that many of the shares held by insiders and early investors would be subject to a lockup agreement, which prohibited them from selling stock for a period of 175 days following the IPO. It's worth noting that the first lockup period, affecting roughly 20% of the shares held by insiders, expired effective March 31. 

It's pretty common for the stock price to fall in the days leading up to a lockup expiration, as traders and investors anticipate a flood of additional shares hitting the market, thereby increasing supply and decreasing demand.

Now what

Early investors in Olo include The Raine Group, RRE Ventures, and Tiger Global Management, among others.

While there's always the potential that insiders and early investors might take advantage of the lockup expiration to sell their shares, we simply don't know if those entities plan to sell their shares today, tomorrow, this week, or even anytime soon. Investors are merely reacting to the possibility that they could sell their stock, which has sent Olo's shares lower in the face of the lockup expiration.

Danny Vena has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Olo Inc. The Motley Fool has a disclosure policy.

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