Medallia Could Falter When Lockup Expires

Significant sales of currently-restricted shares could flood the market when the lockup expires and cause a sharp downturn in share price.

When the 180-day lockup period for Medallia Inc. (MDLA) ends on January 15, 2020, pre-IPO shareholders and company insiders will be able to sell more than 107 million shares of currently-restricted stock in the open market. This number of currently-restricted shares dwarfs the 12.5 million shares trading pursuant to the IPO. When the lockup expires, significant sales of these currently-restricted shares could flood into the secondary market for MDLA and cause a sharp, short-term downturn in share price.

(Source: S-1/A)

This group of pre-IPO shareholders and company insiders includes numerous individuals and VC firms.

(Source: S-1/A)

We believe that pre-IPO shareholders and company insiders may be particularly interested in cashing in on some of their gains. Despite choppy trading, MDLA still has a gain of 46.2% from IPO. Aggressive risk-tolerant investors should consider shorting shares of MDLA ahead of the IPO lockup expiration.

Business Overview: Provider of SaaS Platform for Experience Management

Medallia Inc. offers it enterprise software designed to provide superior experience management. Medallia notes in its SEC filings that its SaaS platform, the Medallia Experience Cloud, is the market leader. The platform captures experience data and analyzes the massive quantity of information to improve omni-channel experiences by using its proprietary AI technology that draw data from across digital, human, and IoT interactions. The company advertises its platform as capable of reducing churn, improve cross-sell and up-sell opportunities, converting detractors to buyers and promoters, and providing tangible ROI.

(Source: MDLA website)

The Medallia Experience Cloud captures more than 4.9 billion experiences on an annual basis and performs approximately 8 trillion calculations every day. More than half of Medallia’s clients are enterprise level organizations with over 1,000 employees. In addition, Medallia is used by 8 of the top 10 global media and communications organizations, 7 of the top 10 enterprise hospitality organizations, 6 of the top 10 global banks, 5 of the top 10 automakers, and 5 of the top 10 enterprise insurance providers.

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Disclosure: I am short MDLA. 

Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any ...

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