Market Standoff Agreement

DEFINITION of 'Market Standoff Agreement'

An agreement that prevents insiders of a company from selling their shares in the market for a specified number of days subsequent to an initial public offering (IPO). The agreement is executed between the underwriters to the issue and the company's insiders. The term during which insiders are prohibited from selling their shares consequent to a market standoff agreement is generally 180 days, but can vary from as little as 90 days to as much as one year.

BREAKING DOWN 'Market Standoff Agreement'

Market standoff agreements are used to avoid precipitous declines in a stock after it commences trading because of massive insider sales. When the dotcom boom turned to bust from 2000 onwards, numerous stocks in the sector lost a major chunk of their market capitalization within weeks of the expiry of such lock-up agreements, an alternate term for market standoff agreements.

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RELATED FAQS
  1. What exactly is insider trading?

    An "insider" is any person who possesses at least one of the following: 1) access to valuable non-public information about ... Read Answer >>
  2. What is an IPO lock-up period and how long is it?

    An initial public offering (IPO) lock-up period is a contractual restriction that prevents insiders who are holding a company's ... Read Answer >>
  3. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  4. What's the difference between insider trading and insider information?

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  5. Can you accidentally engage in insider trading?

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