It's noted here that the Linked In shares dropped 7% after restrictions on insiders from share sales expired. The layman explanation is that a greater supply of shares, and a desire amongst at least some insiders to sell, pushed the share price down.
However, why wouldn't this well-publicized event (and a rich history of lock-up expiries) be telegraphed and priced into markets? Otherwise, one could generate a profitable strategy of buying puts or selling short IPOs ahead of the lock-up release dates. It seems that either there is an inefficiency, or there are constraints on executing this strategy.
Question -- why aren't releases of IPO shares anticipated by financial markets so that the price change post-lockup is random? Links to empirical research proving or disproving the opportunity is also welcome.