HeadHunter Could Be Impacted By Lockup Expiration

Nov. 01, 2019 12:21 PM ETHeadHunter Group PLC (HHR)

12.68K Followers

Summary

When the HHR IPO lockup expires on November 5th, pre-IPO shareholders and company insiders will be able to sell more than 31 million shares of currently-restricted stock.
The number of restricted shares dwarfs the 18.75 million shares offered in the IPO.
Significant sales of restricted stock could flood the secondary market and cause a sharp, short-term dip in share price.
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When the lockup period ends for HeadHunter Group (NASDAQ:HHR) on November 5th, the company's pre-IPO shareholders and company insiders will be able to sell more than 31 million shares of currently restricted shares. This number dwarfs the 18.75 million shares offered in the IPO.

(Source: F-1/A)

Significant sales of currently-restricted stock could flood the secondary market and send shares sharply lower in the short term when the lockup expires. Aggressive, risk-tolerant investors should consider shorting shares of HHR ahead of the IPO lockup expiration on November 5th.

Currently, HHR trades in the $17 to $18 range and has a return from IPO of 29.3%.

Business Overview: Executive Recruitment Company Based in Moscow, Russia

HeadHunter Group LLC operates an online platform that provides recruitment services to job seekers and employers. Recruiters and employers have paid access to the platform's curriculum vitae (CV) database, which contains resumes from job seekers. The online platform offers a job postings function as well as value-added services for both employers and job seekers.

(Source: Company Website)

The company notes in its SEC filings that 86% of the platform's traffic was free as of November 2018, and its site is the third most visited employment website worldwide as of January 2019. Their CV database contained 36.2 million CVs as of December 2018, and the company acquired Job.ru in January 2018. In December 2018, the platform hosted a daily average of 559,000 job postings, which is a significant increase from 344,000 job postings in 2016. It had 20 million unique visitors per month in 2018, which is an increase from 16.7 million unique visitors per month in 2016. HeadHunter had 253,000 paying customers at the end of December 2018.

HeadHunter Group has mobile applications as well to access the mobile marketplace. Their apps have been downloaded approximately 15.3 million times through December 2018. The company notes that the majority of the website's traffic comes from the mobile apps.

HeadHunter was founded in 2000 and maintains its headquarters in Moscow, Russia. The platform serves markets in Russia and the Commonwealth of Independent States. The majority of services to job seekers are free, while employers and recruiters pay fees to access the database and post jobs. The company has approximately 680 employees and was incorporated in Cyprus.

Company information was sourced from the company's website and F-1/A.

Financial Highlights

HeadHunter Group reported second-quarter financial highlights for the period ending June 30, 2019:

Revenue increased 25.7% resulting from increased revenue from its Russia segment. That segment increased by 24.7% with growth coming from small to medium accounts.
Net income decreased to RUB275 million from RUB322 million. The company attributed the negative impact due to expenses related to the IPO.
Adjusted EBITDA increased 36.0% and Adjusted EBITDA Margin increased to 52% versus 48.1% from the prior year.
Adjusted Net Income increased 35.8% and Adjusted Net Income Margin increased to 31.1% versus 28.8% from the prior year.

Financial information was sourced from the firm's website.

Management

CEO Mikhail Zhukov has served in his position since February 2008. His previous experience comes from a variety of Russian IT companies including IBS, which is a Russian systems integrator. He earned a Masters in Engineering at the Moscow Aviation Institute. In addition, he holds a diploma from Plekhanov Russian Academy of Economics.

CFO Grigorii Moiseev has served in his position since February 2008. He previously held senior financial positions at Sputnik Labs and Helios Computer.

Corporate bios were sourced from the firm's website.

Competition: Monster, CareerBuilder, Indeed.com

According to the HeadHunter website, its platform is the top online recruitment site in Russia according to operational and financial measurements. In the global marketplace, HeadHunter faces competition from sites like Idealist, Indeed.com, Monster, and CareerBuilder. In the Russian marketplace, other recruitment sites include Jooble.org, Superjob.ru, and Zarplata.ru.

Early Market Performance

The underwriters priced the IPO at $13.50 per share. The stock closed on the first day of trading at $15.75 for an increase of 16.7%. Shares dipped to $15.33 on June 11. Then they began to climb to reach a high of $21 on September 16. HHR currently has a return from IPO of 29.3%.

Conclusion

When the HHR IPO lockup expires on November 5th, pre-IPO shareholders and company insiders will be able to sell more than 31 million shares of currently-restricted stock. This group of pre-IPO shareholders and company insiders includes numerous executives and board members along with VC firms.

(Source: S-1/A)

Sales of currently-restricted shares could flood the secondary market when the lockup expires and cause a sharp, short-term downturn in share price. Aggressive, risk-tolerant investors should consider shorting shares of HHR ahead of the November 5th IPO expiration. Interested investors should cover their positions during the November 6th and November 7th trading sessions.

Interested in learning more about IPO Lockup investment opportunities? Check out our subscription service, IPO Insights. We update subscribers with actionable investment opportunities that follow the debut of select companies on U.S. exchanges.

This article was written by

Don Dion

12.68K Followers

Don Dion is the CEO of Inland Management, a company focused on acquiring, subdividing, developing and marketing large tracts of land on the fringes of major metropolitan markets. Inland Management has sold land in all 48 contiguous states totaling billions of dollars. As CEO, Don is responsible for helping to maintain and enhance the firm’s strong financial position and identifying opportunities for growth. In addition to his role at Inland Management, Don Dion is the Chief Investment Officer of DRD Investments, LLC. Based in Naples, FL. and Williamstown, MA., DRD Investments is a family office focused on managing a long/short hedge fund, real estate, venture capital and various other financial assets for the Dion family. Don also serves as the trustee of the Dion Family Foundation, which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school, and college education. The foundation also helps individuals by supporting Massachusetts General Hospital. Don is on two leadership boards and advisory committees at Massachusetts General Hospital and the Home Base Program (a partnership between Mass General and the Red Sox Foundation). He consults with Saint Dominic's Academy and serves as a trustee of Saint Michael’s College. Previously, Don was the founder and CEO of Dion Money Management, a fee-based investment advisory firm for affluent individuals, families and non-profit organizations. Founded in 1996 and based in Williamstown, MA. and Naples, FL., Dion Money Management managed approximately one billion in assets for clients in 49 states and 11 countries. While at Dion Money Management, Don was responsible for setting investment policy, creating custom portfolios, and overseeing the performance of client accounts. Don sold the firm to NYC-based Focus Financial Partners (FOCS) on September 1, 2007 and no longer manages money for other families or institutions. Don remains a shareholder of Focus Financial Partners (FOCS). Don is also the retired publisher of the Fidelity Independent Adviser family of newsletters, which provided a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With nearly 100 thousand subscribers in the United States and 29 other countries, Fidelity Independent Adviser published two monthly newsletters and one weekly newsletter. The flagship publication, Fidelity Independent Adviser, was published monthly for 16 years and reached over 60,000 subscribers. In 2011 Don and his daughter Carolyn co-authored the Ultimate Guide to ETFs, available on Amazon.com. Prior to founding Dion Money Management, Don co-founded Litchfield Financial Corp. (LTCH) with Summit Partners. Don served as Chairman and CEO of Litchfield, which was listed on the Nasdaq in 1992 and acquired by Textron Corp. (TXT) in 1999. Don was also the Executive Vice President, CFO and General Counsel for Patten Corporation (BGX) from 1986 to 1988, where he played a critical role in the company’s successful initial public offering on the New York Stock Exchange. From 1983 to 1985, Don was a corporate lawyer with the Boston Law Firm of Warner and Stackpole. Before joining Warner and Stackpole, Don worked as a C.P.A. for Ernst and Young from 1979 to 1983. Don graduated with honors from Saint Michael’s College in 1976 with a B.S. degree in Economics and Business Administration. He received his J.D. from the University of Maine Law School in 1979 and his LL.M. from Boston University Law School in 1982. Don can be reached at donalddion@gmail.com

Analyst’s Disclosure: I am/we are short HHR. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Summary

Business Overview: Executive Recruitment Company Based in Moscow, Russia

Financial Highlights

Management

Competition: Monster, CareerBuilder, Indeed.com

Early Market Performance

Conclusion

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