A lock-up agreement is a contract between a company and its investors that restricts the sale of the company's shares for a certain period of time. The purpose of a lock-up agreement is to prevent the company's stock price from dropping due to a large number of shares being sold on the open market.
Lock-up agreements are typically in place for a period of 180 days after a company goes public. After the lock-up period expires, the company's insiders (such as its officers and directors) are free to sell their shares. However, the company may still have a "quiet period" in place, during which time insiders are restricted from selling their shares. When Lock Up will start? The answer to this question depends on a few factors, including the stock market conditions at the time and the specific stock being traded. In general, lock up periods for stocks last for a set period of time after the stock goes public, typically six months to a year. After the lock up period expires, insiders (such as company executives) are free to sell their shares of the stock on the open market.
What is the purpose of the lock-up period?
The lock-up period is the length of time after an IPO that insiders (such as company founders, officers, and large shareholders) are restricted from selling their shares. The lock-up period is meant to prevent insiders from taking advantage of the IPO pop (the increase in a stock's price immediately following its debut on the public markets) by selling their shares immediately. After the lock-up period expires, insiders are free to sell their shares, which often leads to a sell-off and a decline in the stock's price. What happens after lock-up period? Once the lock-up period expires, insiders are free to sell their shares of stock. If there is high demand for the stock, the price will likely increase. If there is little demand, the price may decrease. Can I sell locked in shares? If you have locked-in shares, you may be able to sell them depending on the rules of the lock-up period. For example, if your lock-up period expires after six months, you may be able to sell your shares after that time. However, you should check with your broker or investment advisor to be sure.
What usually happens after lockup expiration? Once a lockup period expires, insiders are free to sell their shares of stock. This can have a negative effect on the stock price, as it may signal that insiders believe the stock is overvalued. If there is a large number of shares sold, it can also lead to a decrease in the liquidity of the stock.