A lock-up period is a set timeframe after an initial public offering (IPO) during which certain shareholders, such as founders, employees, and early investors, are restricted from selling their shares. This period is intended to maintain stock price stability and prevent market fluctuations.
Why is a lock-up period important for newly public companies?
The lock-up period helps stabilize the stock price by preventing large sell-offs from early shareholders, which could otherwise lead to volatility or a sharp drop in share value.
How long does a typical lock-up period last?
A standard lock-up period lasts around 90 to 180 days after the IPO, though the exact duration can vary based on agreements set during the IPO.
How does a lock-up period impact founders and employees?
Founders and employees may need to wait before cashing out any shares, which encourages them to focus on the company’s long-term performance rather than short-term profits immediately post-IPO.
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