Mavenir Systems Lockup Expiration Is On May 26th: A Temporary Window For Short Sellers

May.12.14 | About: Mavenir Systems (MVNR)


May 26 lockup expiration for Mavenir Systems: A temporary window for short sellers.

The lockup expiration will free some 17.7 million shares of MVNR, far more than the 5.5 million shares offered in the November IPO.

The likely supply shock on May 26 could cause a temporary depression of share price and lead to a short opportunity for aggressive investors. We witnessed this phenomenon with Twitter.

The lockup period that began with the November 6, 2013 IPO of Mavenir Systems Inc. (NYSE:MVNR) will come to a close on May 6, allowing pre-IPO shareholders in the provider of software-based telecommunications networking solutions to sell their outstanding shares.

These shares are primarily held by venture capital firms, though the lockup expiration will also permit MVNR executives and directors to sell their outstanding shares.

The resulting possible flood of MVNR shares available for sale on the market will likely lead to a temporary decrease in the price of MVNR shares, potentially creating a short opportunity for aggressive investors.

After pricing its IPO at $10 per share, far below its expected price range of $15-$17 per share, MVNR gained steadily through late March, reaching its peak at $18.78 per share. The stock has since made gradual losses; MVNR closed at $14.03 per share on May 9th.


Unlocking of ~17.7M Shares
The May 6 lockup expiration will free some 17.7 million shares of MVNR to be sold, far more than the 5.5 million shares offered in the November IPO.

The venture capital firms that hold large stakes in MVNR may choose to sell at least some of their shares in order to raise capital and return funds to their investors, especially given the downward slide the stock has experienced over the past two months.

Major shareholders include North Bridge Venture Partners with 4.4 million shares; Austin Ventures VIII with 4.1 million shares; Alloy Ventures 2005 with 3.1 million shares; August Capital V Special Opportunities with 2.9 million shares; and Cisco Systems with 2.0 million shares.

MVNR directors and executives may also choose to sell some of their shares in the interest of diversification, having had no opportunity to do so since the IPO.

Mavenir's Mobile Business
MVNR offers solutions allowing mobile service providers to deliver Rich Communications Services, including IP-based video, voice, rich communications and enhanced messaging services, via existing networks.

MVNR's solutions respond to the increasing number of consumers using diverse communications services including messaging, traditional voice, IP voice, and texting rather than relying heavily on traditional voice.

The firm's solutions also address the far greater data traffic that consumer usage now generates. MVNR provides solutions to more than 120 mobile networks globally, including T-Mobile (NASDAQ:TMUS), AT&T (NYSE:T), Vodafone (NASDAQ:VOD), Deutsche Telekom AK (DT), Tele2, and Telstra.

Competition From Major and Specialty Providers Within Industry
MVNR faces competition from both major network infrastructure providers and specialty solution providers, some of which are far better capitalized than MVNR.

These competitors include Alcatel-Lucent (ALU), Nokia Siemens Networks (NYSE:NOK), Ericsson (NASDAQ:ERIC), Huawei, Sonus Networks (NASDAQ:SONS), BroadSoft (NASDAQ:BSFT), Comverse (CNSI), Metaswitch, and Acision.

Short Opportunity On The Horizon

The April decline of MVNR is just one reason for major shareholders to take some profits in the company.

We recommend MVNR's lockup expiration as a short opportunity for aggressive investors; however, given MVNR's overall market success post-IPO, along with growing demand for its products, the lockup expiration might only depress the share price temporarily.

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Disclosure: I am short MVNR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.