Lockup Agreement


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Lockup Agreement

Where the purchaser of securities agrees not to sell the securities for a certain period of time (the lockup time).

Lockup Agreement

1. See: Crown jewel lockup agreement.

2. During an IPO, a contract prohibiting executives, underwriters, and/or venture capitalists from selling their shares in the company for a certain period of time. The period of time is usually about six months, but may be longer or shorter. A lockup agreement exists to reduce the pressure for volatility as the company goes through its first few months of public trade.

lockup agreement

A contractual offer of valuable assets or stock made by a takeover target to the suitor deemed most acceptable to management. A lockup agreement tends to discourage unwanted suitors, but it may penalize the target firm's stockholders because it eliminates counteroffers. Also called crown jewel lockup agreement.
References in periodicals archive ?
Like lockup agreements, Rule 144 provides public investors with some assurance against pre-IPO investors' selling a large amount of stock following the IPO.
Most lockup agreements expire after six months, and there is a spike in Nasdaq volumes at about this time.
We measure this variable as the percentage change in the stock price during the six months following the IPO, because most restricted stock is subject to lockup agreements that expire after six months.
(2001), who report significant negative abnormal returns following the expiration of IPO lockup agreements, especially for firms backed by venture capitalists.
Courteau (1995) and Brav and Gompers (2003) argue that the lockup agreement can also be a mechanism for alleviating the adverse selection problem that arises from information asymmetries in IPOs.
The overall results in this study suggest that, at least in Singapore, IPO firms generally do not provide exaggerated earnings forecasts to exploit uninformed investors, because the lockup agreement removes personal incentives to issue aggressive forecasts.
Lockup agreements in Singapore, like those in the United States, prohibit pre-IPO shareholders from selling their shares for a period after the IPO.
Resale of Cowen shares attributable to certain executive officers and directors, many of whom are still subject to lockup agreements and cannot sale of these shares.