Lock-Up Period

A lock-up period is a period of time – typically 90 to 180 days – set by underwriters or companies during which shareholders are not allowed to sell their shares after a company’s initial public offering (IPO). The purpose is to minimise price volatility in the aftermath of the IPO created by existing shareholders or company insiders (management and employees) selling shares in the aftermarket. Institutional investors and investment banks carefully track lock-ups as the pending end of lock-ups creates a potential overhang of stock which could be sold in the market.