The IPO Radar

A lock-up is a contractual agreement barring company insiders from selling their shares for a period after the IPO — customarily around 180 days, though staggered releases and price-based early triggers have made the simple version increasingly rare. It is not a law or an SEC rule. It is a private agreement between the underwriters and the company's existing shareholders, and its terms are disclosed in the prospectus.

The reason it exists is straightforward supply management. Most IPOs sell a small fraction of shares outstanding. Without a lock-up, the people holding the other 85–95% could sell into the market on day one.

Where does the lock-up actually come from?

Not from regulation. There is no statutory lock-up requirement in US securities law.

The lock-up is a term of the underwriting arrangement. Underwriters require existing shareholders — officers, directors, employees with vested equity, venture and private equity investors — to sign agreements not to sell, transfer, hedge, or pledge their shares for a defined period.

Two separate things are worth distinguishing:

The contractual lock-up is what this page is about. Negotiated, disclosed in the underwriting section of the prospectus, and waivable by the underwriters.

Securities law restrictions on restricted securities exist separately, under Rule 144, and govern how and when unregistered shares can be resold. These operate alongside the lock-up and don't disappear when it expires.

The practical consequence: the lock-up is the binding constraint in the first six months, and Rule 144 mechanics matter afterwards.

Why 180 days?

Convention, not calculation.

The figure became standard because it covers roughly two quarters of public reporting, which lets the market see the company operate and report before insiders can sell. It's long enough to demonstrate the business is what the prospectus described, and short enough that shareholders who have often waited a decade will accept it.

Nothing requires 180 days. Lock-ups of 90 days, 120 days, and 365 days all appear, and direct listings frequently have shorter lock-ups or none at all — one of the reasons some companies prefer that route.

What does a modern lock-up actually look like?

The plain 180-day cliff is no longer the norm in larger deals. Three variations are now common, and they can appear in combination.

Staggered release. A fixed percentage of shares unlocks at an earlier date, with the balance at the full term. A structure releasing 20–25% after the first post-IPO earnings report, with the rest at 180 days, is typical. This spreads supply rather than concentrating it on one day.

Price-based early release. Shares unlock early if the stock trades above a stated threshold — commonly a premium of 20–33% over the IPO price — for a defined number of trading days within a measurement window, usually after the first earnings release. The logic is that a stock demonstrating strength can absorb supply sooner.

Earnings-conditioned release. The unlock is tied to the company having reported its first quarterly results, sometimes combined with the price condition above.

The reading consequence: you cannot infer a lock-up expiration date from the IPO date. You have to read the terms. This is exactly the kind of detail that gets lost in secondary coverage and is one reason we extract the terms directly from the prospectus.

Who is bound by a lock-up?

Read the underwriting section, because the answer varies.

Typically bound: executive officers, directors, and holders of a specified percentage of outstanding shares — often all existing shareholders as a condition of the pre-IPO reorganisation.

Typically carved out: transfers to family members or trusts for estate planning, transfers to affiliates of a fund, charitable donations, shares acquired in the open market after the IPO, and sales under a pre-existing Rule 10b5-1 trading plan.

Employees below a threshold are sometimes not individually bound, though they're usually restricted by the terms of their equity agreements anyway.

Can a lock-up be lifted early?

Yes. The underwriters — usually the lead bookrunners — can waive the restriction, in whole or in part, for some holders or all.

Waivers happen for several reasons: a secondary offering the company wants to run, a holder with a specific need, or simply a judgment that the market can absorb supply. Some prospectuses state that the underwriters have no current intention of granting a waiver; that language is not a commitment.

Waivers are worth watching because they're discretionary and because they can substantially change the supply picture ahead of the scheduled date. They may be disclosed in a subsequent filing, and where they are, we record them.

What happens when a lock-up expires?

Less than the folklore suggests, and it depends almost entirely on circumstances.

What definitely changes: the supply of shares that can be sold increases, often by a multiple of the existing float.

What doesn't automatically follow: that they will be. Insiders may not want to sell, may be constrained by trading windows and insider-trading rules, may be subject to Rule 144 volume limitations, or may sell gradually over months through pre-arranged plans.

What tends to happen in practice: expirations are well known in advance, which means they're at least partly anticipated by the market. Studies have generally found modest average price effects around expiration, with considerable variation. Stocks that have performed well often absorb the supply; stocks that haven't sometimes don't.

The more useful signal is what follows. Insider sales are disclosed on Form 4 within two business days. The filings after a lock-up expiry tell you what insiders actually did, which is considerably more informative than speculation about what they might.

Why does the lock-up matter for how a stock trades before expiry?

Because the float at IPO is often a small fraction of shares outstanding, and a small float is easier to move.

A stock trading at a high price on 10% of its shares is being priced by a market where supply is artificially constrained. When that constraint lifts, the market is pricing a different asset — the same company, with several times the tradeable supply.

This is one of the reasons first-day pops can be large and subsequent performance disappointing. The two facts are related through the float.

See Public float · Why do IPOs pop?.

Where do you find the lock-up terms?

In the underwriting section of the final prospectus, filed on Form 424B4, and cross-referenced in shares eligible for future sale.

That second section is worth reading alongside, because it tells you how many shares exist beyond the offering and when each tranche becomes freely tradeable — the full overhang picture rather than just the lock-up date.

See How to read an IPO prospectus · What is Form 424B4?.

Quick answers

How long is a typical IPO lock-up? Around 180 days is the convention, but staggered and price-triggered structures mean the effective date often differs.

Is a lock-up required by law? No. It's a contractual term in the underwriting arrangement.

Can insiders sell any shares during the lock-up? Only through the carve-outs stated in the agreement — typically estate planning transfers, charitable donations, and certain pre-existing trading plans.

Do direct listings have lock-ups? Often shorter or none, which is part of their appeal to companies whose shareholders want liquidity.

Does the stock always fall when a lock-up expires? No. Average effects have generally been found to be modest, with wide variation depending on how the stock has performed.

How do I know when a lock-up expires? Read the underwriting section of the prospectus. The date is derived from the terms there, not from the IPO date alone.

How can I tell if insiders actually sold? Form 4 filings, submitted within two business days of a transaction.

What is Rule 144? The securities law framework governing resales of restricted securities, which operates separately from and continues after the contractual lock-up.

IPO lock-up data · Public float · What happens after an IPO? · What is Form 424B4? · How to read an IPO prospectus · Index inclusion after an IPO

Sources

Underwriting sections of issuer final prospectuses filed on EDGAR
Securities Act Rule 144 — resale of restricted securities
Exchange Act Section 16 and Form 4 reporting requirements
Rule 10b5-1 trading plans
The IPO Radar filing database — Methodology