![]() ![]() Large shareholders selling their stocks can also be perceived as a lack of confidence in the company and that may lead to panic sell. The lock-up period restricts the existing shareholders from liquidating their assets too quickly after the initial public offering. During the initial public offering a company can issue new shares to the public or the existing shareholders can sell their stocks to the general public. It may be a newly formed company or an old company that wants to sell their stocks to the general public to raise capital. In order to be listed on an exchange, a company needs to go public with their stocks. Private companies can go public by selling their stocks to the general public, this is known as the initial public offering. Back To: BUSINESS LAW How does a Lock Up Period Work? It is to prevent a dramatical price drop of the stocks of the company. The companies specify a lock period to ensure that the market is not over flooded with the company's share at any given point of time. A lock-up period may stay for as long as 90 days to 180 days depending on the company. The lock-up period may also be applicable to the shareholders who acquire the stocks during the IPO. The same is also known as a lock-in, lock-out or locked up period. Usually following the initial public offering (IPO), the company management and investors are restricted to sell their shares. ![]() It is a period of time when the management and large shareholders of a publicly traded company are not allowed to sell their shares in the market. Update Table of Contents What is a Lock-Up Period? How does a Lock Up Period Work? Academic Research on Lock-up Period What is a Lock-Up Period? ![]()
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