Lock up - period

A Lock up period is a time frame during which investors are prohibited from selling their shares acquired before the start of trading on the stock exchange, in other words, specific actions with securities are prohibited at a company investor (most often during the IPO procedure, large investors, funds and underwriters receive a large number of shares). This period is usually set from 90 to 180 days, starting from the beginning of the stock trading. The condition for the duration of the Lock-up period is usually described in the contract with the acquirer in the course of stock issue. Regulators do not make setting an attribute mandatory. Basically, a Lock-up period is one of the key attributes to be specified on stock issue.

What is this period specified for? The Lock-up period allows you to protect the share price from excessive volatility at the beginning of trading, when shareholders want to sell the securities portfolio they have purchased and lock in profits earned. If you do not enter a Lock-up period and give investors the opportunity to sell the purchased securities at a convenient time, this can lead to a significant decrease in prices during trading. But on the other hand, it is worth noting that the presence of a Lock-up period is not a guarantee that there will be no surges at the beginning of trading.

At the end of the Lock-up period, the holder has the right to sell, which can often lead to a decrease in the securities price on the stock exchange.