Lockup Period

lockup period

The time during which employees and other early investors are prohibited from selling stock in a newly listed company. Investment banks that bring the securities to market establish lockup periods to protect investors in a new issue from large insider selling that can have a major price impact because of a relatively small number of shares available for trading. Lockup periods are usually 180 days from the date of the initial public offering.

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Lockup Period

A time during which a publicly-traded company forbids management and large stockholders to sell their shares, usually following an initial public offering. Depending on the company, the lockup period may be 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 an indication of a lack of confidence in the company, triggering a panic sell. After the lockup period ends, however, shareholders may sell without restriction.