Sep 22 2011 by Jason

Is A 180 Day Lockup Typical When A Company Goes Public?

Question: A company I used to work for has registered to IPO. Apparently I have to wait 180 days until after the company goes public to sell. Is this typical? When do investors get to sell? What happens when everyone gets to sell at that 180 day point? Does the stock usually tank? Or is there a provision to spread out the sales?

The answer is “yes, it’s standard.”  In fact, it is so typical that most financing documents of private companies lay out the restriction and get investor approval even in the earliest days of a company’s life.

There are exceptions, but when you see different provisions, it’s always driven by the investment bankers, not the company or investors.

As for what happens when the 180 day lockup comes off – it really depends on the company.  More times than not, the price goes down as investors and others speed to sell some / all of their stock to take risk off the table.  There are usually no provisions to spread out the selling.