e.l.f. Beauty (NYSE: ELF) – Strong Sell or Short Recommendation
The 180-day lockup period for the e.l.f. Beauty Inc. IPO is scheduled to expire on March 27, 2017. The lock-up period was originally set to expire on 3.21, but was extended due to earnings release. At this point, the company’s pre-IPO insiders will be able to sell their 36M shares for the first time since e.l.f Beauty went public. This represents 81.2% of the total shares outstanding (see below).
e.l.f. Beauty is up 57% (pre-market session 3.8) since its IPO, and we predict investors will be motivated to sell their positions both to free up capital as well as cash in on significant gains.
We predict a 2-3% price dip in the days (-11, +9) surrounding the lock-up event (day 0). This is consistent with price movement we have seen around such expirations in the past.
Our firm has found movement around lock-up period expirations to be most promising in situations where a large percentage of total shares outstanding are restricted, the stock has performed well since its IPO and outside investors hold a significant portion of the restricted shares. e.l.f Beauty fits the description for all these requirements.
Major pre-IPO shareholders include twelve executive officers and company directors as well as large outside investor TPG Capital, which holds 42.7% of total shares outstanding (see below).
(S-1/A Filing)
We previously highlighted this event on our here.
Business Overview: Provider of high-quality cosmetics at affordable prices
Based in Oakland, California, e.l.f. Beauty Inc. manufactures high-quality cosmetics that are sold at affordable prices. The company sells the majority of its products for $6 or less. It began with an e-commerce site before expanding into retail sales at CVS Pharmacy (NYSE:CVS), Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) and is now one of the fastest-growing cosmetics brands in the U.S. The company reports that its sales have grown 20 times faster than the growth of other cosmetics companies, on average, since 2014.
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