Stock market basics
Lock-up period
Definition
A lock-up period is a set time after an IPO during which insiders and early investors agree not to sell their shares. Terms vary and are disclosed in the prospectus, but many last 180 days, and the end of a lock-up can add a wave of shares available to sell.
Example
Say a company sells 15 million shares in its IPO, while insiders and early investors keep 60 million under a 180-day lock-up. When the lock-up ends, the shares that can trade may jump from 15 million to 75 million, five times as many. Not every holder sells, but many traders mark that date because supply can rise sharply.
Hypothetical numbers, for illustration only.
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