Today’s double-digit move to the downside for Clover Health (NASDAQ:CLOV) is quite the reversal on a month-over-month basis. Indeed, investors in CLOV stock saw nearly $29 per share roughly one month ago. Since then, shares have dwindled back toward the $10 SPAC IPO price.
Given Clover’s short interest ratio around 37% and its low per-share price, this is a company that has been targeted by retail investors as a potential short squeeze. Given the momentum we saw early in June, many investors made some quick money on this trade. However, those who haven’t gotten out may be straddled with a loss today.
As CLOV stock approaches $10, investors may wonder where to go from here. After all, this is a stock that has proven itself to be highly volatile.
Today especially, investors are seeing that volatility, and there is one specific catalyst at play. Let’s dive into what this catalyst is, and why investors are selling CLOV stock in a big way.
CLOV Stock Down on Lock-Up Period Expiration
Today’s downside move of 14% in CLOV stock appears to be tied to its lock-up period expiration.
Following an IPO, many companies put various stipulations forward restricting the number of shares available to trade. Insiders such as early employees or other early investors holding significant chunks of shares may be forced to hold onto those shares for a given period of time. In the case of Clover Health, the lock-up period was 180 days following its IPO.
A higher supply of shares on the market is generally a negative thing. Indeed, as we’ve seen with today’s move, it appears insiders are keen on monetizing their early investments in the company.
Such moves are also natural for many stocks. Even the best companies such as Facebook (NASDAQ:FB) saw significant selling post-lockup period expiration. Accordingly, investors should be wary of viewing today’s volatility as something that is likely to persist. If anything, today’s moves are likely to be temporary for CLOV stock.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.