Two days ago on November 13, 2001, Tellium’s 180-day lockup period on its shares officially ended. This will allow insiders who obtained shares prior to the company's IPO last May to sell their stock (see Market Gives Tellium a High Five). The result is that as of Tuesday, an additional 77 million shares of the company were released onto the open market. Analysts and investors following the company waited for this date with anticipation, fearing that company executives, venture capitalists, and other investors would start selling large numbers of shares onto the open market, putting pressure on the stock.
As a show of confidence in the company, the management team signed agreements yesterday restricting them from selling their shares until January. In total, the management team holds roughly 14.7 million shares of Tellium stock.
While this may be a nice gesture, in reality it may have minimal impact. The agreement extending the lockup period only includes shares owned by Tellium management. This means that 62 million shares, roughly 80 percent of the shares unlocked on Tuesday, are held by venture capitalists and other investors. Since these investors are not part of the extended lockup period, they may sell their shares at any time.
As of September 30, 2001, Tellium had 112,370,747 shares outstanding, including those held by executives. All told, including outstanding warrants and options, Tellium’s fully diluted common stock totals approximately 143,633,256 shares.
Tellium executives say the move was meant to send an important message to shareholders who have seen the stock dip below $5 a share in the past couple of months.
"People have no interest in selling stock at these levels. They feel the stock is incredibly undervalued," says Harry Carr, chairman and CEO of Tellium. "Second, we are here to build a great company. I think shareholders should realize we wouldn’t be doing this if we didn’t have confidence in the company’s prospects."
In trading Thursday, Tellium dropped 0.03 (0.52%) to 5.71 at the end of the day.
Tellium, like most of the optical sector, has been hit hard by the uncertainty in the economy and the cutbacks in capital spending by carriers. Like many optical IPOs before it, the key to Tellium's success will lie in expanding its customer base and fundamentals (see Tellium Stock Pops After Earnings and Qwest Slowdown Spooks Investors).
Some analysts covering the company say that this vote of confidence from management is a good sign and it might signal that Tellium has been able to sign up another customer. While Carr has remained tight-lipped on the subject, sources following the company say they believe Deutsche Telekom AG (NYSE: DT) will be announced as Tellium's fourth customer by the end of the quarter.
”That is absolutely not true," says Losch. "I’m definitely not leaving, not after everything we’ve been through. There is no better place I can think of going right now."
"If Mike is leaving, it’s news to me,” says Carr.
— Marguerite Reardon, Senior Editor, Light Reading