IPO Lock-Up

(redirected from Initial Public Offering Lock-Up)

IPO Lock-Up

A practice in a publicly-traded company that forbids management and large stockholders from selling their shares for a period of time following an initial public offering. Depending on the company, the IPO lock-up usually lasts 90 to 180 days. It exists to ensure that the market is not flooded with shares in the company at any given time, which would increase supply and cause a drop in price. Large shareholders selling their shares may also be seen as equating to a lack of confidence in the company, triggering a panic sell.
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These shareholders may sell up to 10% of their shares following the expiration of the initial public offering lock-up period, and have agreed to do so pursuant to a coordinated sales program organized by an investment bank.
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