lockdown

Lockdown

A specified period when an employee of a public company is barred from selling - and occasionally buying - their company's stock.

Notes:

These types of equity transaction restrictions can be imposed by securities regulators or underwriting firms if a company has recently issued public securities. They can also be self-imposed by a corporation as an impetus for employees to retain company stock.

See also: Employee Stock Option - ESO, Insider Trading, Open-Market Transaction, Securities & Exchange Commission - SEC, Share Purchase Rights

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lockdown

A prohibition against a firm's employees making changes in the asset composition of their retirement plan. Corporate officials may lock down a retirement plan during a period of administrative changes in the plan. Also called blackout period, quiet period.

Case Study The term lockdown became a familiar component of the finance lexicon following Enron's bankruptcy on December 2, 2001. The company's management had locked down the employees' 401(k) retirement plan five weeks earlier on October 26, when Enron stock traded at a price of $15.40 per share. The lockdown was initially scheduled by directors in March 2001 to facilitate upcoming administrative changes in the retirement plan, a perfectly legal reason. Employees were notified in early October of the coming restriction on changes to the retirement plan. Unfortunately for Enron employees who chose to maintain most of their funds in Enron shares, the firm's stock price declined to $9.98 by the time the lockdown ended on November 13. Thus, employee investments in the firm's stock decreased by approximately 33% during the two-and-a-half-week lockdown period. Some employees claimed to have been misled with regard to the last day they were allowed to make changes to the retirement plan. Other critics claimed Enron's management had knowledge of the firm's severe financial difficulties and, as a result, had a fiduciary responsibility to the employees to postpone the lockdown until the news had been released. Many of the firm's employees maintained a substantial portion of their retirement funds in Enron stock, which by the end 2001 traded for less than $1 per share. The stock had traded above $80 per share early the same year.