Lock-up Period
A lock up period is a a period of fixed duration that often follows a public listing in which you typically cannot sell your shares.
What is a lock-up period and why is it used?
A lock-up period is a period of time, typically 180 days, after an initial public offering (IPO) during which major shareholders, such as company insiders and venture capitalists, are restricted from selling their shares. The purpose of a lock-up period is to prevent the stock price from plummeting due to a flood of shares being sold by early investors.
How long is a typical lock-up period?
A typical lock-up period typically lasts for 180 days after an IPO.
Are there different types of lock-up periods?
There are different types of lock-up periods. A hard lock-up, also known as a mandatory lock-up, is a period of time during which insiders are not allowed to sell their shares, regardless of the stock price. A soft lock-up, also known as a voluntary lock-up, allows insiders to sell their shares if the stock price reaches a certain level or after a certain period of time.
Can a lock-up period be waived or extended?
A lock-up period can be waived or extended under certain circumstances, such as if a company is acquired or if the SEC grants a waiver.
What happens to shares after the lock-up period ends?
After the lock-up period ends, major shareholders are free to sell their shares in the open market.
Are lock-up periods only used in IPOs?
Lock-up periods are typically used in IPOs, but they can also be used in other types of offerings such as secondary offerings or private equity investments.
Are there any exemptions to lock-up periods?
There may be exemptions to lock-up periods for certain shareholders, such as in the case of death or financial hardship. Additionally, some institutional investors may have agreements in place that allow them to sell shares before the end of the lock-up period.
