An IPO lock-up is a contractual ban on insiders selling their shares for a set period after a company lists, typically 90 to 180 days. Founders, employees, and pre-IPO investors agree not to sell so that the newly listed stock is not immediately swamped by supply. When the lock-up expires, that constraint disappears at a known date, which makes expiries one of the most predictable supply events in equity markets.
Why lock-ups exist
At listing, only a small fraction of a company’s shares, the float, actually trades. The rest sits with insiders. Underwriters impose lock-ups to stabilise early trading: a small float means early demand meets scarce supply, which supports the price during the period when the market is forming its view. The flip side is that the traded price is set by a sliver of the shares outstanding, which can flatter valuations.
The expiry trade
Because expiry dates are disclosed in the prospectus, markets position for them. Studies and market experience point the same way: stocks tend to drift lower into large expiries and often trade weakly around them, particularly when the stock is up a lot, insiders are sitting on gains, and the float is small relative to locked shares. Not every expiry hurts: if insiders signal they are holding, or the free float is already large, expiries pass quietly. Staggered and early-release lock-ups, increasingly common, blur the single cliff-edge date.
What to watch
The percentage of shares unlocking relative to current float, insider cost basis versus market price, whether the underwriters release early (a bullish signal disguised as supply), and short interest built ahead of the date. In a reopened IPO window with a full pipeline, the lock-up calendar becomes a map of where equity supply will land quarter by quarter.