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Roku: Biggest Hurdle Coming Soon

Mar. 06, 2018 1:30 PM ETRoku, Inc. (ROKU)24 Comments
Bill Maurer profile picture
Bill Maurer


  • IPO lockup expiration comes in last week of March.
  • Class A share count could soar from here.
  • Will insiders take profits on the huge run?

While shares are well off their all-time highs, streaming media player Roku (NASDAQ:ROKU) has been one of tech's better stories since going public last September. A strong first earnings report sent shares soaring as seen in the chart below, and the company's growth prospects remain quite strong. In the near term, the stock's biggest hurdle is coming soon, when insiders can start cashing out after the IPO lockup expiration date hits.

(Source: Yahoo! Finance)

Like most newer tech firms, Roku has two classes of shares, which primarily allows founders and early investors to have substantial voting control. There are the Class A shares, which trade publicly, and contain one voting right per share. Also, there are Class B shares, which do not trade, but contain 10 voting rights per share.

As you can see in the chart below, shares outstanding for Class A, originally proposed to be about 15.7 million, are already getting close to 20 million. That number will rise naturally thanks to stock-based compensation, but also if Class B shareholders decide to convert. According to Nasdaq, the 180-day lockup period expiration is March 27th.

(Source: Roku 10-K filing and amended S-1 filing; *Was based on underwriters not exercising option to purchase more shares.)

The reason why this situation is so interesting is because the 10-K filing showed just under 80 million Class B shares. That means a ton of potential dilution for Class A investors, even if only a small percentage of those shares are converted in the near term. Some insiders might want to lock in a profit, while others might just sell for personal liquidity or other reasons. When you have an IPO at $14 and a stock now at $40, I wouldn't blame executives, other insiders, or early holders for selling.

Interestingly enough, there are obviously

This article was written by

Bill Maurer profile picture
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

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