When a company gives you stock options or shares as part of your equity compensation package, a percentage of company ownership belongs to you and your fellow employees. Preventing the market from getting too flooded with sales Helping stabilize the stock price after it enters the market Lock-up periods serve a few practical purposes, including: (Recent tech IPOs allowed employees to sell between 15% and 25% of their shares before the end of the lock-up period, according to TechCrunch. During this lock-up period, the company’s employees won’t be allowed to sell their shares unless an early release enables them to cash out a small number of their shares. It’s common to have a lock-up period that lasts 90 or 180 days after a traditional IPO. These lock-up periods help keep things consistent at the company by ensuring that the company leadership remains intact during the time around the IPO and helps the business keeps running smoothly without a lot of sudden churn. Lock-up periods are a set amount of time in which certain shareholders can’t sell or redeem their shares. However, as awesome as it will be to see your company's name in bright lights on the NASDAQ, remember that you may have to wait for another 90 or 180 days before selling your shares because of a lock-up period. Maybe you have even checked out our Equity Outcome Simulator, and the math is mathin’ as the kids say on TikTok. The moment of the big IPO day is approaching - you have worked hard for this moment. Lock-up periods can help stabilize stock prices, reward some investors, and prevent the market from getting flooded with too many sales. Lock-up periods block some shareholders from selling their shares for a certain period after an IPO.Īllowing employees to sell stock too early after an IPO can affect public perception of the company and hurt stock prices.
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