Shares of ESS Tech (NYSE:GWH) tumbled by more than 10% in trading Thursday. Weighing on the energy storage company was news that some large investors might sell a portion of their shares.
ESS Tech filed a prospectus for the sale of nearly 126 million shares of its common stock. The company isn't directly selling these shares. Instead, certain large shareholders might sell shares from time to time. The prospectus noted that slightly more than 100 million of those shares are subject to lock-up restrictions for a 180-day period that began Oct. 8.
That date coincides with the closing of its merger with ACON S2 Acquisition Corp, the SPAC that took ESS Tech public last month. The transaction created the first publicly traded U.S. long-duration energy storage company.
The deal infused ESS Tech with $308 million in cash, giving it the funds to expand. Some of that cash came from a private investment in public equity led by several institutional investors. These investors are positioning themselves to eventually cash in on their stakes by filing in advance to sell some shares.
Shares of ESS Tech have surged more than 50% since the completion of its business combination last month. In that light, it's understandable that some of its large shareholders might consider taking some profits. That's common practice for institutional investors. However, it will take the market some time to absorb all these shares, which could weigh on the stock price until they finish selling.