Cerebras Shares Are Coming Out of Lockup in Waves. Here's the Date That Matters Most.

Last Wednesday, about 14.6 million shares of Cerebras Systems (NASDAQ:CBRS) became eligible for sale for the first time. Two weeks earlier, another 14.6 million. Two weeks before that, 14.6 million more. The artificial intelligence (AI) computing specialist's initial public offering (IPO) lockup isn't waiting for an expiration date -- it has been dissolving on a schedule since the stock started trading.

Cerebras went public on May 14, selling 34.5 million shares at $185 apiece and raising $6.4 billion. Nearly every other share stayed locked.

But the lockup was never a single 180-day freeze. It lets shares out on 11 separate dates.

The first 10 free about 171 million shares, by the company's own estimate. And Cerebras has about 238 million shares outstanding. The 11th date frees whatever is left.

Most of those dates are already behind the stock. Here's how the schedule works, and why Nov. 9 is the one worth circling.

Image source: Getty Images.

Most of the supply is already loose

The releases started immediately. About 2.5 million shares held by rank-and-file employees could be sold on day one, and another 2.5 million on day two. That second release required the stock's first-day close to top 133% of the IPO price, or about $246. It closed at $311.07.

The bigger waves were tied to earnings. About 27.7 million shares held by directors, officers, and early investors became sellable two trading days after Cerebras reported first-quarter results on June 23. Another 36.4 million (the schedule's biggest single release so far) came two trading days after the second-quarter report on Aug. 12. From there, the schedule turned biweekly -- about 14.6 million shares each on Aug. 19, Sept. 2, and Sept. 16.

Add it all up, and nearly 113 million of the estimated 171 million early release shares are already free. In other words, most of the lockup was gone well before its expiration date.

Nov. 9 is the date to circle

Three more waves sit on the published schedule, about 19.4 million shares apiece. One lands Sept. 30, and October brings the other two, on the 14th and the 28th. Together, they free about 58 million more shares.

Then comes the finale. Everything still locked becomes eligible for sale on whichever of two dates comes first: the second trading day after Cerebras reports third-quarter results, or Nov. 9, which lands 180 days after the date of the IPO prospectus.

The company hasn't put a number on that last wave. It is everything not yet freed.

The tech company hasn't scheduled its third-quarter report yet. But its first report as a public company came 84 days after the quarter closed, and its second came 43 days after.

To beat Nov. 9, the company would have to report by about Nov. 4, a faster turnaround than it has managed yet, and I wouldn't count on that. Nov. 9, then, is likely the day the lockup ends.

Of course, the schedule isn't ironclad. The underwriters can release any of these shares early, and even after full expiry, company insiders face securities-law limits on how much they can sell at once.

Does the new supply change the story?

The market's reaction to the supply has been uneven. The stock fell about 26% over the two sessions following the June 23 report, the second of which was also the day the 27.7 million-share wave opened. The AI specialist's roughest stretch, a slide of more than 30% from mid-August into early September, began days after the schedule's biggest wave and ran through another release date.

But last Wednesday's release passed with shares rising that day. Scheduled supply, after all, is arguably the easiest kind of news for the market to see coming.

Notably, a stock that peaked just above $386 on day one now trades around $199 as of this writing, about 7% above its IPO price.

Meanwhile, the business those shares represent keeps growing quickly. Second-quarter revenue came in at about $180 million, up 74% from a year earlier.

Demand also runs years ahead. Remaining performance obligations, the backlog of contracted work Cerebras hasn't delivered yet, stood at $25.4 billion as of June 30 -- and a significant share of that comes from one customer, OpenAI.

Demand isn't in question here. What changes every couple of weeks is how many shares can chase it.

Ultimately, the lockup calendar tells investors who can sell and when. It says nothing about whether they will, and nothing about the company's valuation.

If I owned the stock, I wouldn't sell just because more supply is on the schedule. And I wouldn't treat a quiet release date as a buying signal, either. But I'd know when the calendar runs out. After Nov. 9, there's nothing left to unlock.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.