lockup period

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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.

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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2011), the existing papers primarily focus on venture capital (VC) firms or disregard the exit process in the time after the IPO or following the end of lockup periods.
After the expiration of first of the several lockup periods barring insiders from selling Facebook's stock following its IPO, early investors, who owned a combined 271 million Facebook shares, became eligible to sell their stock.
According to State Street's Vision paper, today's post-crisis environment fund selection will emphasise six critical operational and risk management elements: investment strategy and performance, portfolio liquidity, portfolio transparency, reconsideration of pricing and lockup periods, operational due diligence and the independence of custodians and administrators.
Almost 50% of hedge fund managers said they are experiencing pressure from their investors to eliminate lockup periods and redemption notice requirements while fewer managers report pressure from investors to reduce fees.
Private-equity-like hedge funds have shorter lockup periods.
According to State Street's Vision paper, today's post-crisis environment fund selection will emphasize six critical operational and risk management elements: investment strategy and performance, portfolio liquidity, portfolio transparency, reconsideration of pricing and lockup periods, operational due diligence and the independence of custodians and administrators.
However, Brau, Lambson, and McQueen (2005) formally develop a signaling model, which predicts that less transparent or less risky firms would impose longer IPO lockup periods due to information asymmetry or a lower lack of diversification costs.
Important for investors, 83 percent are not planning to seek lockup periods for new investors.
MLM GMS(TM) is designed to capture the returns of a broad range of hedge funds with complete transparency and liquidity, without the baggage of traditional hedge fund investments, including mandatory lockup periods.
Firm performance improvements during the lockup periods could reflect nontradable shareholders' efforts to improve corporate governance and operations.
Base and incentive fees vary depending on the investor capital lockup periods.
We find that forecasters are more likely to accept longer lockup periods, so that the lockup expires after the first post-IPO earnings announcement.