Flood of New Shares Puts Healtheon Under Water

The stock of slumping Healtheon Corp. became a little less healthy Tuesday as the medical information company’s trading “lockup” expired.

The stock skidded 19% as millions of insiders’ shares became available after the end of the waiting period that blocked their trading. Santa Clara, Calif.-based Healtheon, which links doctors, insurers and patients through the Internet, slumped $7.19 to close at $31.75 in heavy trading of 7 million shares.

Healtheon said 18 million to 20 million shares became available for trading Tuesday, three times the 6.3 million shares that were available Monday.

The shares had been “locked up” under Securities and Exchange Commission guidelines that prevented them from being traded for 180 days after Healtheon’s Feb. 10 initial public offering. The shares were owned by company insiders at the time of the IPO, Pacific Growth Equities analyst Mark Mulcahy said.

“It’s Economics 101--supply increases, the price goes down,” Mulcahy said.

The end of lockup doesn’t necessarily mean that insiders will sell--but they could.

Healtheon’s shares have plummeted 70% from their record closing high of $105 on May 21.

Mulcahy said Tuesday could be a dress rehearsal for what will occur in late September, when 50 million shares that were locked up under Healtheon’s May 20 merger with WebMD Inc. will become available.