Let me start off by saying that when it comes to the stock market, I let professionals handle my accounts. I dabbled in day trading a few years ago, and it didn’t end very well at all. That being said, I am noticing something interesting with Demand Media (ticker symbol: DMD) stock over the last week and want your take on it.
I believe that the 6 month lock up period for insiders ended a week ago, meaning that company employees and others with special stock rights couldn’t sell until 6 months after the company had been trading publicly. According to the DMD S-1 filing, company employees and insiders hold millions of shares of stock.
Although it’s not usually smart to sell a stock when it’s down, I would bet there are a lot of employees who have considerable amounts of net worth tied up in DMD stock. Many are and were likely counting on selling the stock to pay for various expenses. After all, they worked at a growing company to accumulate this stock, and selling it would allow them to be compensated.
The lock up period is now over, but I haven’t seen much of a change in the volume of shares traded over the last few days. If insiders were selling their millions of shares of stock, one would expect the volume to go way up. Although the price has fallen, there seems to be some stability at the $10 mark.
From my outsider’s perspective, it would seem to indicate that company shareholders think that DMD at around $10 is undervalued and they aren’t willing to sell at this price. Maybe they realize that putting many shares for sale with lower demand would end up lowering the price even more than the last few months, but from my perspective, perhaps insiders think the company is undervalued. What do you think?
I don’t know enough about the company or its valuation to give an expert stock opinion, but it’s been interesting to watch. To my knowledge, I do not own any shares of DMD and have not discussed this with anyone working for the company, although I do business with Enom and NameJet.