Newly-public Demand Media, which Seeking Alpha calls “a terrible company” with a fair market price of about $0, had its IPO six months ago at a $1.4 billion valuation and carried a half-way decent share price that hit a high of around $24 but has been rockily falling toward the $13 range, where it was last month. But this week DMD’s insider lockout–the period of time during which company executives are prohibited from selling stock–just expired. And as of yesterday afternoon, the stock is tanking.
The easy conclusion is that insiders are dumping their stock because they know their company is a content farm that has little future as Google cracks down on sites that cater aggressively to search engine traffic with content that’s little more than search terms surrounded by related words. But it’s not because insiders are selling, the financial blogs say–Demand has had a collapse in demand. Just like traffic from Google, demand for Demand Media has simply been… shut off.
The stock typically only trades around 363,000 shares a day, according to The Domains, but since the lockout expired trading volume has fallen drastically. That means fewer people are buying and selling, not that the market was flooded with insider shares.
About 16 people at the company own about 58 million shares, The Domains says. If insiders started unloading, they’d quickly drive the stock to rock-bottom. Surely they must be smarter than that. It seems more likely that the announcement of the insider lockout expiring and the threat of a sell-off is causing potential buyers to stand by for the time being.
At any rate, it looks like the company’s got more problems than cracking down on the forums at Demand Studio Sucks.