Lockup Period
Definition
A lockup is a contractual restriction — agreed with the underwriters, not imposed by regulation — that prevents insiders, employees, and pre-IPO investors from selling shares for a set period after an IPO, customarily 180 days in the US (structures vary, including staggered or price-triggered early releases).
Its purpose is to prevent a flood of insider supply from hitting a newly public stock and to align insiders with the deal's aftermarket. Stocks frequently trade weakly into lockup expiry as the market anticipates the new supply; underwriters can waive lockups early, sometimes to run an organized secondary offering instead of uncontrolled selling.
After expiry, insider sales are still subject to securities-law constraints such as Rule 144 and 10b5-1 plans.
Why interviewers ask
Lockups appear in IPO-process walkthroughs and in market questions like 'why did this recent IPO sell off six months after listing?' Knowing the customary 180-day term, that it is a contract with underwriters, and the supply-overhang dynamic at expiry rounds out a complete ECM answer.
Related terms
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