The short answer
A lock-up is a promise by a company’s insiders and early investors not to sell their shares for a set period after an initial public offering (IPO). The SEC’s investor education site says terms vary but most lock-ups last 180 days. When the lock-up ends, a large number of shares can suddenly be sold, and the stock often trades heavily around that date.
Research on lock-up expirations has found a small average price drop around the expiration day, larger for companies backed by venture capital. The date is known months in advance, which makes it easy to watch, but the effect on any single stock is unpredictable.
What a lock-up is
Before a company goes public, its shares are held by founders, employees, venture capital and private equity funds, and other early backers. In an IPO, the company sells a slice of shares to the public, usually with the help of investment banks called underwriters.
The underwriters want the newly listed stock to trade smoothly. If early holders could dump millions of shares on the first day, the price could collapse. So the underwriters ask insiders and major holders to sign lock-up agreements promising not to sell, or to sell only limited amounts, for a fixed period.
According to Investor.gov, the SEC’s investor site, lock-ups typically cover company insiders, including employees, their friends and family, and large shareholders. Lock-ups are agreements between the company, its holders and the underwriters, not a requirement of law. But if a company has one, securities law requires it to disclose the terms in its registration statement, including the prospectus.
How long lock-ups last
The standard has long been 180 days from the IPO pricing. A 2025 review of market practice by the law firm Cooley noted that “180 days post-pricing is still the standard for IPOs,” though some companies now use shorter or staged periods. Some lock-ups release a portion of shares as early as about 90 days, and some deals allow a small slice of employee shares to be sold from the first day of trading.
Companies that went public through a merger with a special purpose acquisition company (SPAC) or through a direct listing may have different arrangements. The prospectus or merger documents spell them out.
Early release provisions
Many recent IPOs include terms that end the lock-up early, in whole or in part. Cooley’s overview of early lock-up releases describes several common types:
- Earnings-based releases. The lock-up ends a set time after the company’s second earnings report as a public company, as long as at least 120 days have passed since pricing. Cooley lists Reddit and Airbnb among companies that used this approach.
- Price-based releases. A portion of shares is freed if the stock trades well above the IPO price, often 20% to 50% above, for a set number of days, typically 10 trading days in any 15-day period.
- Staged releases. Shares are released in steps. Cooley’s examples include Snowflake (25% after 91 days) and DoorDash (40% after 91 days).
- Blackout pull-forward. If the lock-up would otherwise end during a company blackout period, when insiders are barred from trading, it ends a few trading days before the blackout begins.
Underwriters can also waive a lock-up for specific holders. FINRA Rule 5131 requires the lead underwriter to publicly announce a release or waiver for an officer or director through a major news service at least two business days before it takes effect.
What happens to the stock
The best-known academic study is Laura Field and Gordon Hanka, “The Expiration of IPO Share Lockups” (Journal of Finance, 2001). According to its abstract, they found “a permanent 40 percent increase in average trading volume” when lock-ups expire, and “a statistically prominent three-day abnormal return of −1.5 percent.” The drop and the volume increase were “much larger when the firm is financed by venture capital,” and venture capitalists sold “more aggressively than executives and other shareholders.”
Two points stand out. First, the average effect is small. A 1.5% move over three days is easy to miss among normal daily swings. Second, the expiration date is public, so you might expect traders to have already priced it in. The study found a drop anyway, which is part of why it is still cited.
Insiders who are officers or directors still have to file a Form 4 within two business days of a sale after the lock-up ends. They also remain subject to company blackout periods and insider trading law. So even after a lock-up, executives often sell through 10b5-1 trading plans, which show up on WallStPal’s planned sales page.
How to read a lock-up expiration
When a lock-up date approaches, a few questions help:
- How many shares unlock compared with the current float? If the public float is small and the unlocking shares are large, the potential supply is significant.
- Who holds the shares? Venture capital funds have a set life and eventually return money to their investors, so they often sell or distribute shares. Founders may hold longer.
- Is the stock above or below the IPO price? Early investors often bought well below the IPO price, so many may be sitting on gains even if the stock has slipped. Employees with options or stock awards may also want to sell to pay taxes or diversify.
- Is this one date or several? Staged releases spread the selling over time.
Finding the exact date
Lock-up periods are usually counted from the date of the final prospectus, which is the day the IPO was priced, not the first day of trading. The two are often one day apart. To work out the date yourself:
- Open the company’s final prospectus on EDGAR. It is usually filed under the form type 424B4 a day or two after pricing.
- Find the lock-up section and note the number of days and any early release conditions.
- Count forward from the prospectus date.
Early release terms can move the date. A price-based release depends on how the stock trades, and an earnings-based release depends on when the company reports. A waiver for officers or directors has to be announced at least two business days ahead under FINRA’s rule. Because of these moving parts, third-party calendars sometimes disagree, and it is worth checking the prospectus wording before relying on any single date.
The prospectus lists the lock-up terms, usually in sections titled “Shares Eligible for Future Sale” and “Underwriting.” WallStPal’s IPO lock-up calendar lists upcoming expirations.
Examples
Facebook, 2012. Facebook went public in May 2012 at $38 a share, and its lock-ups ended in stages. TechCrunch reported that the first expiration in August 2012 freed 271 million shares and the stock fell to $19.69, then a low. On October 31, 2012, another 234 million employee shares became eligible for sale and the stock opened lower. The largest release, about 777 million shares, came on November 14, 2012. That day the stock went the other way: Business Today reported it was up about 7.5% during the session. The biggest unlock did not produce the biggest drop.
Uber, 2019. Uber’s IPO priced at $45 in May 2019. When its main lock-up ended on November 6, 2019, about 763 million shares became eligible for sale, according to an analyst estimate cited by CNBC. The stock fell as much as 8.7% during the day and hit an all-time low of $25.58 before closing down 3.8%. The lock-up end also came days after a quarterly earnings report, so the move cannot be pinned on the lock-up alone.
Explain it like I’m 13
Imagine a group of friends start a lemonade business and then sell some shares of it to the whole school. To keep things calm, they promise the school they will not sell their own shares for six months.
When the six months are up, they are allowed to sell. Some of them might want to, since they have been waiting a long time. If a lot of them sell on the same day, there is suddenly more for sale than usual, and the price can dip. Sometimes it does not, because buyers already knew the date was coming.
That promise is the lock-up, and the day it ends is the lock-up expiration.
Where the rule comes from
- Investor.gov (SEC), Initial public offerings: lockup agreements.
- FINRA, Rule 5131 (New Issue Allocations and Distributions), paragraph (d)(2) on lock-up releases.
- Field and Hanka, “The Expiration of IPO Share Lockups,” abstract on RePEc.
- Cooley, Early lock-up releases: overview and trends (January 2025).
This guide explains public filings and research. It is not investment advice.
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