(For both Uber and Beyond Meat, the lockup period was 180 days following their respective IPOs.) When lockup periods expire, insiders or other. The company is often somewhere in the middle-wanting to keep employees and investors happy but not wanting it to look like insiders don't have faith in it. A lockup period is when company insiders, such as employees granted stock options or executives who own shares, sign an agreement that prohibits them from selling shares for a specified period of time. Usually employees and early investors want shorter lockups (so they can cash out sooner) while the underwriting banks want longer ones (to keep insiders from flooding the market and sinking the share price). While lockups used to be simple-usually lasting 180 days for everyone-they have become increasingly complex. This helps to ensure the market will not disproportionately increase the supply, which drives prices downward. When the company is ready to go public, the underwriting bank then reaffirms the existing agreements in new contracts. ![]() When employees and pre-IPO investors initially get their shares or options, they sign a contract with the company that typically prohibits trades for the first 90–180 days after a future IPO. Lockups are designed to prevent insiders from liquidating assets too quickly after a company goes public. Depending on the company, the IPO lock-up period typically lasts between 90 and 180 days before these shareholders are allowed the right, but not the obligation, to exercise the option. Generally, a lock-up period is a condition of exercising an employee stock option. JSTOR ( September 2014) ( Learn how and when to remove this template message)Ī lock-up period, also known as a lock in, lock out, or locked up period, is a predetermined amount of time following an initial public offering where large shareholders, such as company executives and investors representing considerable ownership, are restricted from selling their shares. A lock-up period is designed to stop early investors and insiders from selling their shares for a set period once a company completes an initial public offering (IPO), helping to minimise selling pressure in the early stages of life as a publicly-traded business.Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources. ![]() This article needs additional citations for verification.
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