the buyers of the secondary will short the stock here with impunity to drive it lower and buy in lower. they can then use the secondary shares to cover their shorts. this gives them a fixed, guaranteed risk free investment.
In case you are unfamiliar with this tactic, the buyers of the secondary will short a nominal amount of shares, say 500K shares at current prices, forcing the share price down. They then get a discount to the current share price of 5% or so. When the secondary is completed at a lower share price than where the stock is now, they can then cover their short to raise the price and get an instant lift on the shares, or turn in their newly bought shares to cover their short.
This is why insiders insider shave been selling. They agreed to a lock up during this pricing period. They got out "high"
this is directly from the SEC doc. Shorting is allowed by the underwriter:
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include over-allotment and stabilizing transactions, passive market making and purchases to cover syndicate short positions created in connection with the offering. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from us in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the consummation of the offering.
That is of course unless management has more contract announcements up its sleeve between now and the closing. Then the decision to short and use secondary-purchased shares to cover could be a most unprofitable one ;).