Update: The sales appear to be part of a follow-on public offering that the company pre-announced in late January. In a registration document filed with the SEC, Rocket Fuel proposed to offer 2 million shares and certain selling stockholders signaled plans to sell 3 million. At the time, John called it "a necessary step in stabilizing the stock and making shares accessible to more investors."
But since those sales the stock has fallen steadily, with only a brief reprieve toward the end of February.
Wall Street can get jittery when insiders sell large stock volumes, although in Rocket Fuel's particular case it's not clear whether the stock's latest tumble is due to more insiders dumping smaller volumes of equity or (worse for Rocket Fuel) external investor fears that the insider trades signal a lack of faith from senior management.
Whether management is indeed losing faith, and if so what that might be attributable to, is anybody's guess. But here are a few hypothetical fears that selling investors might be feeling – or projecting onto management.
- The SaaS future comes soon. A market shift away from ad network models and toward software-based trading platforms could harm Rocket Fuel, as more agencies and brands decide to pursue self-serve models. The time horizon for this transition and Rocket Fuel's ability to prepare for it are open questions.
- "Take rate" pressure. Downward pressure on so-called "take rates," defined as the percentage of a media buy the ad network company gets to keep after publishers are paid.
- Supply side challenges. Within the last year, competition has intensified to secure exclusive supply side arrangements. Everyone is getting in on publisher development, including agency trading desks, ad networks, and even other publishers.
- Mobile and video challenges. These categories are rife with pure plays. Rocket Fuel has made substantial investments but could be facing headwinds from new entrants and large platform companies.
Whatever the reason for its plunge, Rocket Fuel's stock is not alone. Criteo, which went public around the same time, has seen its stock crumble too – to $28.94 from its debut at about $35 and from an all-time high near $60. And Matomy, when it cancelled plans for a London Stock Exchange IPO on April 3, cited in part "volatility" in ad tech share value.
Meanwhile Rubicon Project, which began trading on the New York Stock Exchange earlier this month, ended Friday at $19.49, near where it started.