Lockup agreement
Also called: lock-up, lock-up period, lockup period, lockup expiration
An agreement by insiders or investors not to sell or transfer their shares for a set period, commonly 90 to 180 days after an IPO or an offering.
Last verified
How it works
Underwriters and placement agents typically require officers, directors and large holders to sign lockups before an offering. Each signer agrees not to sell, pledge or otherwise transfer shares (and often not to hedge them) for a fixed period. For IPOs the period is commonly 180 days; for follow-on and registered direct offerings it is often shorter, such as 60 or 90 days. The company itself frequently agrees to a standstill on new issuances for a period too.
Lockups can include early release provisions, for example after a strong earnings release, or if the stock trades above a set price for a number of days. The underwriter can also waive a lockup.
Why it matters
A lockup temporarily removes shares from the supply that can trade. When it expires, a large number of shares can become saleable on a single date. In companies with a small public float, the shares held by insiders and pre-IPO investors can be several times the float.
Worked example
Hypothetical: Company X lists with 3,000,000 shares sold in its IPO and 17,000,000 held by founders and pre-IPO investors under 180-day lockups. On day 181, up to 17,000,000 more shares can be sold, subject to Rule 144 for affiliates and any restricted shares. That is more than five times the IPO share count.
How to spot it
The IPO prospectus (S-1 and the final 424B4) has a section titled "Shares Eligible for Future Sale" and an "Underwriting" section describing lockups. Follow-on prospectus supplements and purchase agreements describe the company's own standstill. See Lockup expirations.
Related terms
Guides that use this term
Dilution 101 · 6 min read
Registered Direct vs PIPE vs Underwritten Offering, Compared
The three common ways small companies sell a block of shares at a fixed price, how each is registered and disclosed, and what the fees do to net proceeds.
Dilution 101 · 5 min read
Float vs Shares Outstanding: Three Different Numbers and When Each Matters
Why shares outstanding, non-affiliate float and tradeable float differ, where each comes from in SEC filings, and how the choice changes the math.
Ownership & insiders · 6 min read
Form 144 Explained: Notice of Proposed Sale by Affiliates
What a Form 144 is, who files it, the 5,000-share and $50,000 thresholds, Rule 144 volume limits, and why a Form 144 does not prove a sale happened.
Offerings & deals · 5 min read
Form S-1 Explained: IPO vs Resale Registrations, S-1/A and Effectiveness
How a Form S-1 moves from first filing to effectiveness, the difference between an IPO S-1 and a resale S-1, and what 424B4 and 424B3 mean.
Corporate events · 6 min read
Lockup Expirations Explained: 180-Day Lockups, Early Releases and Leak-Outs
How IPO lockup agreements work, where their terms are disclosed, how early releases and waivers are announced, and how leak-out agreements limit selling.