The goal of an IPO lockup period is to stop the flooding of the market with too much of a company’s stock supply. They want to be sure the investors are happy with their returns but also don’t want to show that insiders lack faith in the stock. The company itself is usually in the middle. However, underwriting banks would ideally like the IPO lockup period to be longer to prevent insiders the drop the share price. When this period ends, the trading restrictions get removed.Īny investor or employee wants the lockups to be as short as possible so that they can cash out early. The lockup usually lasts between 90 and 180 days. This happens when a company offers its first public stock.Ī lockup period is a contract that states there is a period after a company goes public when the major shareholders are not allowed to sell their shares. What is an IPO lockup period?Ī lockup period means that there is a predetermined time frame in which corporate insiders, investors, or employees cannot sell or redeem their shares after an initial public offering. This article will explore in more detail the IPO lockup period and how it works. This period can vary, and it is usually happening anywhere from 90 days to 180 days from the day of the IPO. The initial public offering, also known as the IPO lockup period, is a signed restriction that prevents shareholders of a company from selling the stock before the company goes public. After an IPO, many companies are going to tie up their stock through a lockup period that keeps investors from cashing out too soon. However, things do not always move this quickly. If they choose to cash out, what they need to do is sell their shares and gain profit.

Early investors in a company that is about to go public need to understand what the IPO lockup period is.

Stock lock up period