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Finance

Is Root Insurance (ROOT) Stock a Buy or Sell on Lockup Expiry?

Root stock closed at $10.66 on April 23. The stock has been on a downtrend lately. It has dropped 45 percent in the past three months and pulled back 60 percent from its IPO price. The decline can be attributed to several factors. 

First, Root saw an increase in selling as the IPO lockup period approached expiry. When lockups expire, the market can be flooded with new shares. If the demand can’t keep up with the increased supply, the stock price falls. Fearing that the lockup expiry would drag down ROOT stock, some IPO investors have been rushing to sell.

The decline in Root stock can also be linked to the class-action lawsuit that the company faces. The company has been accused of misleading investors about its cash flow needs. The lawsuit relies heavily on a Bank of America analysts’ research. The research stated that the company might not become cash-flow positive until 2027. Usually, investors view lawsuits as a risk, which cautions trading in ROOT stock amid the class-action lawsuit. 

View more information: https://marketrealist.com/p/root-insurance-stock-buy-or-sell/

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