A lock-up period is a set time when certain shareholders - like company insiders, employees, or early investors - can’t sell or transfer their shares.
The lock-up stops a flood of shares hitting the market, which could crash the stock price or mess up a fund’s plans.
A lock-up period is a set time when certain shareholders - like company insiders, employees, or early investors - can’t sell or transfer their shares. It’s common in initial public offerings (IPOs), private equity, and hedge funds.
The lock-up stops a flood of shares hitting the market, which could crash the stock price or mess up a fund’s plans. It keeps things stable, shows insiders believe in the company, and gives the market time to figure out a fair share price.
IPOs: Usually 3 to 6 months, but it depends on the deal.
Private Equity: Often years, matching the fund’s lifespan (8–12 years).
Hedge Funds: From a month to a few years, based on the fund’s strategy.
After an IPO, a company’s execs might be barred from selling shares for 6 months. When the lock-up ends, if tons of shares are sold, the stock price might dip.
In private equity, investors’ money is tied up for years so the fund can focus on long-term growth without withdrawals.