Fiverr Could Head Lower With Lockup Expiration

When the lockup period ends for Fiverr International (NYSE:FVRR) early next week on December 10th, pre-IPO shareholders and company insiders will have the opportunity to sell 25 million currently-restricted shares that are currently subject to lockup agreements.

(Source: S-1/A)

The number of shares subject to the lockup dwarfs the 5.26 million shares offered in the IPO.

(Source: S-1/A)

Significant sales of FVRR stock by currently-restricted shareholders could flood the secondary market and cause a sharp, short-term dip in share price when the lockup expires. The FVRR lockup expiration provides a short opportunity for aggressive, risk tolerant investors.

Business Overview: Digital Platform Connecting Businesses with Freelancers

Fiverr is a digital platform that connects businesses with freelancers across a wide array of services. Their e-commerce platform is designed as a marketplace that uses a comprehensive services catalog and a robust search process. At the time of its IPO, the company reported that it had facilitated over 50 million transactions and had approximately 830,000 freelancers across 160 countries selling services like video creation, logo design, editing, blog and article writing, and website development.

Fiverr believes that its business model easily facilitates the order and payment process for both buyers and sellers. Its catalog of services offers over 200 categories, which the Fiverr calls Gigs®. Individual Gigs have well defined parameters, including duration, scope, and price. Buyers can leave reviews. The prices range from $5 to thousands of dollars depending on the service and seller. Fiverr calls this their Service-as-a-Product (SaaP).

In July 2019, Fiverr launched a new service called Fiverr Studios. It enables freelancers to offer bundled services in order to take on larger projects. Some studios offer services such as packages to help create and maintain Shopify stores or kickstarter packages, including business card design, letterhead, logo design and a social media kit. The company notes that the average Gig on Fiverr Studios is approximately seven times larger than a typical Gig on Fiverr. The company expects to focus on Fiverr Studios as an area of future growth.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in FVRR over the next 72 hours.

Disclaimer: I wrote this article myself, and it expresses my own ...

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