Yahoo Shares Fall After Insiders’ ‘Lockup’ Is Lifted

Shares of Yahoo Inc. fell 5.6% Monday after restrictions on certain company insiders expired, allowing them to freely sell shares.

Shares of Santa Clara, Calif.-based Yahoo, the leading Internet directory, fell $10.75 to close at $181.38 on Nasdaq.

The “lockup” restrictions on shares related to Yahoo’s acquisition of GeoCities were lifted Monday, a spokeswoman said. Yahoo bought free Web-page service GeoCities for 21.5 million shares and converted 8.6 million employee options to buy GeoCities stock into 5.82 million Yahoo options on May 28.

Investors sometimes sell stock when the restrictions lapse on fear that heavy insider selling will drag down shares, said Dalton Chandler, an analyst with Needham & Co.

“The rumor is that there’s a big chunk of stock that the lockup is expiring on,” Chandler said.

Investment bankers place restrictions that generally last several months on company insiders after stock offerings or acquisitions to limit stock volatility and prevent profiteering by executives.

Monday’s dip came after Yahoo shares rose 9.5% last week.

That boost came as the company reported that its latest quarterly revenue, profit and operating margin all exceeded analysts’ estimates. Yahoo also said 105 million visitors used its Web services in September, compared with 80 million in June.

Though the volatile shares are well off their April high of $244, they are still up 53% in 1999.