The 180-day lockup period for the Tabula Rasa Healthcare Inc. (Nasdaq: TRHC) IPO is set to expire on March 30, 2017.
At that time, pre-IPO insiders will be able to offer their 11,209,158 shares, potentially driving down the price due to the significant increase in supply on the market. With 15,509,158 total shares outstanding, the restricted shares represents 72.2% of the total shares.
Pre-IPO shareholders include four outside investors, who hold an aggregate of 41.1% of the total shares outstanding. Our firm has found outside investors tend to be particularly motivated to sell shares once restrictions are lifted in order to free up capital for other investments, as well as capitalize on gains.
Our firm expects a price dip in the days (-11, +9) surrounding the lock-up event (day 0) for Tabula Rasa Healthcare. This would be in line with price movement we have seen around past lock-up expirations.
Business summary
Tabula Rasa Healthcare Inc. provides technology that is patient-centered to hospitals and healthcare facilities to improve their ability to track medication regimens, lower costs, manage risks and improve patient outcomes. The company offers cloud-based software solutions to its customers. Since its founding in 2011, the company reports that its revenues grew to $70 million for the year that ended on Dec. 31, 2015. For the first six months of 2016 that ended on June 30, 2016, the company reported that it had revenues of $42.6 million and a net loss of $77,000.
Executive management
Dr. Calvin H. Knowlton is a co-founder, the chief executive officer and the chairman of Tabula Rasa Healthcare Inc. He has also served as the CEO and chairman of CareKinesis since May 2009. Previously, he founded excelleRx Inc. and served as its CEO and president from April 1995 to July 2007. Knowlton has a pharmacy degree from Templeton University, a Divinity degree from Princeton Theological Seminary and a Ph.D. in Pharmacoeconomics from the University of Maryland.
Dr. Orsula V. Knowlton is a co-founder and the president of Tabula Rasa Helathcare Inc. She has also served as a director and the president of CareKinesis since May 2009. Knowlton held numerous executive positions at excelleRx Inc. from April 1995 to July 2007. She holds a pharmacy degree from the University of the Sciences School of Pharmacy and an executive Master of Business Administration from Temple University.
Early Market Performance and Financial highlights
Tabula Rasa Healthcare Inc. had a less than stellar market debut. The company went public on 09.28.16, offering 4.3 million shares. The shares priced at $12, below its initial range of $13-$15 and finished its first day of trading at $14.70. Since then, the stock price has ranged between $10.39 to $16.85. Currently share price is $13.17 (post-market session 3.16).
On March 13, Tabula Rasa Healthcare reported earnings results for the quarter. Highlights from the fourth quarter include:
- Q4 revenue of $27.3M, an increase of 38%, from same quarter the previous year.
- Q4 gross margin of 34%, compared to 30% for the same quarter the previous year.
- Q4 net loss of $6.0M, compared to a net income of $1.1M for the same quarter the previous year. The large loss was largely due to a $5.0M debt related expense and a $3.4M stock-based compensation expense.
Conclusion: Short Opportunity For Experienced Investors
For the last six months, Tabula Rasa's stock price has stayed near its IPO price of $12. The stock reached a high of $16.85 on Feb.13, and has been drifting down since then with shares down 20% over the last month.
We predict pre-IPO shareholders who own the stock at a very low price and who have been restricted from selling, may be eager to bail out once lock-up period expires on March 30.
With 72.2% of shares currently restricted, if shareholders decide to sell even a portion of these shares, it could have a significant impact on stock price.
We recommend investors sell or short shares before pre-IPO shareholders have the chance to on March 30.
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