BuzzFeed’s stock tanked 41 percent on Monday after the company’s lockup period expired, allowing its initial investors to sell their shares freely.
BuzzFeed’s stock has consistently declined since the company’s initial public offering in December. Since the company has been publicly traded, BuzzFeed has lost three top editors, called for buyouts in its news division, and cut its workforce, according to Business Insider.
A BuzzFeed spokesperson confirmed the stock’s dive was due to the lockup period’s expiration on June 1.
As the Wall Street Journal explained:
Many companies going public have a lockup agreement in place for insiders preventing them from selling their shares until the end of a designated period. Such a move is typically intended to reassure investors that, at least initially, there will be no new large blocks of shares coming to market that might be a drag on the share price.
The BuzzFeed spokesperson told the Journal that the company is sensitive to extreme fluctuations when major investors sell because the company has a very low “float” and few stock owners.
As of Monday, the company is valued lower than what AOL bought it for in 2011. BuzzFeed’s market capitalization is roughly $300 million, according to Yahoo Finance, which is $15 million lower than AOL’s purchase price of $315 million.
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