In the video below, senior technology analyst Eric Bleeker discusses Yelp's surprising 20% jump Wednesday. Investors in tech IPOs -- especially flashy ones -- have gotten used to pain around lockup expirations when insiders can sell out. The poster child was Facebook's recent lockup expiration, where volume spiked the next morning and its shares were soon down 6%. Angie’s List also recently plunged on its own expiration.
So, with Yelp facing a lockup expiration this week, many were predicting a quick crash as 52.7 million shares were available for trading, a whopping 75 times its average trading volume. However, in Yelp's case, early investors appeared not to have sold their shares. This left shorts who had piled into the stock to exit their positions, and Yelp went on to soar more than 20% Wednesday.
Eric warns investors about this example in looking for short-term riches. Just as we've seen recent IPOs like Facebook crushed as negativity built on itself, the flip side is that when everyone plans for a negative event -- like a Yelp crash post-expiration -- positive momentum can build on itself. It's a timely lesson that the real path to stock market riches is picking great companies built for the long run. To hear Eric's full thoughts, watch the video below.
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