Lock-Up Agreement

AAA

DEFINITION of 'Lock-Up Agreement'

A legally binding contract between the underwriters and insiders of a company prohibiting these individuals from selling any shares of stock for a specified period of time. Lock-up periods typically last 180 days (six months) but can on occasion last for as little as 120 days or as long as 365 days (one year).

INVESTOPEDIA EXPLAINS 'Lock-Up Agreement'

Underwriters will have company executives, managers, employees and venture capitalists sign lock-up agreements to ensure an element of stability in the stock's price in the first few months of trading. When lock-ups expire, restricted people are permitted to sell their stock, which sometimes (if these insiders are looking to sell their stock) results in a drastic drop in share price due to the huge increase in supply of stock.

RELATED TERMS
  1. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  2. Market Standoff Agreement

    An agreement that prevents insiders of a company from selling ...
  3. Final Prospectus

    1. The final version of a prospectus for a public offering of ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Eating Stock

    The forced purchase of a security when there are insufficient ...
  6. Seasoned Security

    1. A financial instrument that has been publicly traded in the ...
Related Articles
  1. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  2. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  3. Technical Indicators

    What are the signs of a bear market rally?

    Read about some of the signs of a bear market rally, an unpredictable bull movement that takes place in the middle of a stronger downtrend.
  4. Fundamental Analysis

    Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger market exchanges.
  5. Entrepreneurship

    How can I become a venture capitalist?

    Find out what it takes to become a venture capitalist, and read about some of the primary attributes private equity firms look for in a potential hire.
  6. Entrepreneurship

    How is venture capital regulated by the government?

    Learn about some of the ways in which the U.S. government and the Securities and Exchange Commission regulate venture capital.
  7. Forex Education

    What's the difference between bid-ask spread and bid-ask bounce?

    Understand the difference between the bid-ask spread that determines the buy or sell price for a stock and a bid-ask bounce, a situational price volatility.
  8. Options & Futures

    How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option writing.
  9. Options & Futures

    Do you have to be an expert investor to trade put options?

    Learn about investing in put options and the associated risks. Explore how options can provide risk, which is precisely defined to predetermined limits.
  10. Options & Futures

    Are put options more difficult to trade than call options?

    Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets fall in value.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center