A123Systems, the battery maker and greentech poster child that launched an initial public offering six months ago, has just arrived at a milestone in its young public life: the expiration of what’s called a lock-up agreement for officers, directors, employees and early investors holding more than two thirds (about 70 million shares) of the company’s common stock. Six months after A123’s $371 million IPO, these insiders are now free to cash out.
By mid-day on Monday, A123’s shares sank more than 5.9 percent to less than $14, after closing on Friday at $14.83 and falling off former highs above $20. Trading volume has climbed up to 4 million shares today, more than 2.6 times the average volume for A123’s shares since its September IPO.
The purpose of lock-up agreements is to prevent a company’s stock from flooding too quickly onto the market in a short period, thereby putting a damper on the stock price. When these agreements expire, it’s not uncommon for a company’s share price to take a hit. As A123 noted in the risk section of its prospectus last fall, the simple, “market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.”
A123 has generated a lot of excitement on the public markets on the bet that the nascent market for plug-in vehicles will take off, and carry A123 with it. The company has won battery supply contracts for Fisker Automotive’s planned plug-in hybrid Fisker Karma and the upcoming electric Fiat 500.
But as it stands now, while A123’s revenue has grown in recent years, it has never turned a profit. Revenue and profits aren’t expected to ramp up until after 2012, and investors have proven impatient, sending the stock has been up and down over the past several months.
A123’s investors include General Electric, Procter & Gamble, Motorola, Qualcomm, North Bridge Venture Partners, Sequoia Capital, CMEA Ventures, FA Technology Ventures, OnPoint and the Massachusetts Institute of Technology. (Check out our chart showing the company’s major shareholders and how much they own.)