On Saturday, November 30, the 25 day quiet period on underwriter research subsequent to the November 5 IPO of Wix.com (WIX), a global provider of web presence solutions for SMB's, will come to an end. With the expiration of the quiet period, the IPO underwriters will be allowed to release research reports to the market, which will likely result in at least a short-term rise in the price of WIX shares.
The stock initially priced at $16.50 per share, and has since held fairly steady with fluctuations between $16.19 and $18.90, closing at $18.30 on November 21.
The underwriters, including J.P. Morgan, BofA Merrill Lynch, RBC Capital Markets, Needham & Co, and Oppenheimer & Co, will attempt to boost the stock's price with a release of positive research reports at the close of the quiet period.
The past two years of our research efforts and recent academic studies have provided empirical evidence of a correlation between the quantity and visibility of IPO underwriters and increased share prices at the closing of the quiet period. Prices typically will start to rise a few days before the quiet period expires, as savvy investors begin to purchase shares under the assumption that the underwriters will only release positive research reports; these investors realize that there would be little reason for an underwriter to release a negative report on a firm it recently underwrote. These early stock buys generate the perception of increased demand and push prices up as the quiet period nears expiration.
As a provider of web development services for SMB's, WIX stands to benefit tremendously from the huge numbers of websites being created around the globe. A recent survey from Netcraft found 767 million total websites, four times the number of sites found five years ago. This trend is unsurprising, as websites have come to be considered essential for most businesses. Perhaps because of this necessity, WIX faces extreme competition from similar website developers.
Powerful competitors like Oracle Corporation (ORCL), Microsoft Corporation (MSFT), and Adobe Systems (ADBE) are much better capitalized and have access to far greater resources than WIX. WIX also faces competition from free and open-source tools like Drupal, KompoZer, and WordPress.
Avishai Abrahami co-founded WIX and served as the Co-CEO since 2006; he became sole CEO in September 2010. Mr. Abrahami previously served as Arel Communications & Software's Vice President of Strategic Alliances.
Wix.com has performed reasonably well in the market thus far, and certainly does have some appeal due to constantly growing demand for its services, so the upcoming bump from the quiet period expiration may be a good time to own part of the WIX business by becoming a shareholder.