Neuronetics Could Feel The Heat When Lock-Up Expires

The 180-day lock-up period for Neuronetics Inc. (STIM) ends on December 25, 2018. When this period ends, the company's pre-IPO shareholders may opt to sell their shares in the secondary market. More than 11 million shares are subject to lock-up agreements and just 5.5 million shares are trading pursuant to the IPO. When these 11 million shares become eligible for trading on December 26, there could potentially be a surge of share volume traded in the secondary market. This flood of shares could cause a sharp, short-term downturn in share price.

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(Source: S-1/A)

Trading in STIM has been mixed during this six-month period and the stock currently has a return from IPO of 13.4%. The stock was priced at $17 and closed on its first day of trading at $27.78, for an increase of 63.4%. The shares climbed to a high of $37.54 on September 10. Currently, the stock trades between $19 and $20.

Business Overview: Medical Technology Company That Develops and Markets Treatment for Major Depressive Disorder

Neuronetics developed and designed its treatment for patients with psychiatric disorders, specifically major depressive disorder (MDD). The company is at the commercial stage with its product, the NeuroStar Advanced Therapy System. This non-invasive office-based treatment delivers transcranial magnetic stimulation (TMS) which results in a pulsed MRI-strength magnetic field. This field generates electrical currents to stimulate the brain regions associated with mood.

(Source: Neuronetics website)

In its SEC filings, Neuronetics noted that it has 781 active NeuroStar Advanced Therapy Systems in use in approximately 615 psychiatry offices. The company estimated that 50,000 patients have been treated with their system.

Typically, treatment options for MDD are antidepressant medications, and many patients receive these prescriptions from the primary care physician. Neuronetics believes that medications have two limitations: side effects and limited effectiveness.

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Disclosure: I am/we are short STIM.

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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