Retail

Chewy stock surges as the online pet retailer brushes off lockup expiration worries

Key Points
  • Shares of Chewy, the online pet retailer, gained more than 5% on Wednesday, as the company brushed off lockup expiration worries.
  • The ending of that period can cause a headache for businesses if many employees unload their assets, causing a sell-off in the stock, as has been the case for other companies in 2019.
  • The company reports mixed third-quarter results on Monday, causing shares to slide, but they have since recovered.
A dog sits in front of the New York Stock Exchange (NYSE) during Chewy Inc.'s initial public offering (IPO) in New York, U.S., on Friday, June 14, 2019.
Michael Nagle | Bloomberg | Getty Images

Shares of Chewy, the online pet retailer, gained more than 5% on Wednesday, as the company brushed off lockup expiration worries. Shares rose more than 8% to an intraday high of $27.69 before easing off slightly.

Trading volume on the stock surpassed 7.7 million before the end of the session, more than triple its 30-day average.

The lockup refers to a period of time when employees of a newly public company are restricted from selling their stock. The ending of that period can cause a headache for businesses if a large number of employees unload their assets, causing a sell-off in the stock, as has been the case for other companies in 2019.

"There was a lot of angst about this lockup expiration, and to date, obviously, we have not seen any announcements of major share sales," said Seth Basham, an analyst for Wedbush Securities. "So, that is potentially causing a little bit of a relief rally."

In November, Uber's shares plunged to an all-time low in intraday trading leading up to its lockup expiration. The plant-based food company Beyond Meat watched its stock plummet more than 20% as trading opened up for insiders.

Chewy reported mixed third-quarter results on Monday, causing shares to slide, but they have since recovered.

"People began to digest results a little bit more clearly and say, 'Listen, there's actually a more clear path to profitability for this company, unlike a lot of the other internet-based direct-to-consumer brands,'" Basham said.

Still, like many newly public companies this year, Chewy's stock has struggled. The stock is more than 30% below its all-time high of $41.34.

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