Lock-Up Period
A contractual restriction preventing insiders from selling shares after an IPO, typically lasting 90 to 180 days.
What is Lock-Up Period?
A lock-up period is a contractual restriction that prevents company insiders — including founders, executives, employees, and early investors — from selling their shares in a newly public company, typically for 90 to 180 days following an IPO. The restriction reduces supply of shares during the critical post-IPO period and prevents insiders from immediately dumping shares on new public investors. When the lock-up expires, a surge of insider selling can create significant short-term price pressure.
Example
When a high-profile tech company completed its IPO at $20/share, insiders were prohibited from selling for 180 days. On the lock-up expiration date, insiders holding 200 million shares became eligible to sell, contributing to a 15% single-day price decline as markets anticipated heavy supply.
Source: SEC — Lockup Agreements