Lock-up 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.

Lock-up period.

A lock-up period is the time during which you cannot sell an investment that you own.

You are most likely to encounter a lock-up period if you acquire shares in an initial public offering (IPO) because you had a private equity investment in the company before it went public and receive shares in the IPO proportionate to your private equity ownership interest.

You may also have a lock-up period if you are an owner or an employee of the company and are granted shares.

The lock-up period may last as long as 180 days. In some cases, though, the lock-up period is graduated, meaning that after the initial 180 days you can sell an increasingly larger portion of your shares over the next two years.

After the lock-up period ends, you are free to sell all your shares if you wish.

References in periodicals archive ?
The specific provision in the IPO lock-up agreements being waived is the lock-up extension provision that may extend, upon the occurrence of certain events, the 180-day IPO lock-up period for an additional period of up to 34 days.
Starting in just a few months, they will be free to sell their shares as the so-called lock-up period expires.
Although the lock-up period was due to expire on Sunday, April 30, 2006, the Company's underwriting agreement provides for an automatic extension of the lock-up period for an additional 18 days after Cbeyond's quarterly earnings press release.
However, the shares will be subject to a lock-up provision for six (6) months from the Closing Date and will be adjusted in the event the Company's stock price at the end of the lock-up period is either greater than twenty-five percent (25%) higher or lower than the price used in the Definitive Agreement.
AMEX:AQA) today announced that its officers and directors are extending the lock-up period on their restricted personal holdings in the company's stock for an additional 90 days, until May 13, 2002.
Two exceptions to the extended lock-up period provide that the officers may sell shares as part of a follow-on public offering by APT should such a transaction be pursued and completed within the extended lock-up period, and that officers may gift shares to the extent such transfers would constitute a completed gift of shares under the Internal Revenue Code of 1986, as amended.
5 times today's closing price for any five consecutive trading days during the extended lock-up period, then at the close of the Nasdaq Stock Market on the fifth trading day, 25% of the securities initially subject to the lock-up agreement will cease to be subject to the lock-up restrictions.
The original lock-up period ends on September 16, 2000, and the 45-day extension period ends on October 31, 2000.
Rather, it is intended to allow Aether's significant shareholders the opportunity to sell shares in an orderly manner, and to extend the lock-up period to five months after the completion of the offering.
The notes are convertible at the option of the investors into shares of Cypros common stock once the applicable lock-up period expires.
Technology companies showed greater volatility around the expiration of their lock-up periods than did life sciences companies.