Lock-up Period
The lock-up period is a predetermined time frame during which investors or insiders are restricted from selling their shares after an initial public offering (IPO) or another significant financial event. The purpose of the lock-up period is to prevent large amounts of shares from flooding the market immediately after the IPO, which could cause the stock price to drop. Lock-up periods typically last for 90 to 180 days, after which investors are free to sell their shares.
Example
After a company’s IPO, insiders such as executives and early investors are subject to a 180-day lock-up period, during which they cannot sell their shares to prevent sudden stock price volatility.
Key points
• A time frame during which investors or insiders are restricted from selling shares after an IPO or significant financial event.
• Prevents large amounts of shares from being sold immediately, which could negatively impact the stock price.
• Typically lasts between 90 and 180 days.
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