lock-up period
A window of time after an IPO or investment during which major shareholders or investors are restricted from selling their shares.
Example
“After the IPO, insiders faced a 180-day lock-up period before they could sell their shares.”
Memory Tip
LOCK-UP period = shares are LOCKED. Can't sell for a set time after IPO or investment.
Why It Matters
Lock-up periods affect your ability to liquidate investments and can significantly impact your wealth strategy. If you receive shares through an IPO or as part of an investment, understanding when you can sell them helps you plan your financial goals and avoid being trapped with illiquid assets when you need access to cash.
Common Misconception
Many people assume that once a company goes public through an IPO, all shareholders can immediately sell their shares at any time. In reality, insiders and major investors face restrictions that can last 180 days or longer, meaning they cannot exit their positions even if the stock price drops significantly during this period.
In Practice
When Facebook went public in 2012, early employees and investors were restricted from selling shares for 180 days. An employee who owned 1000 shares worth 38 dollars each at IPO (38,000 dollars total) had to wait six months before selling, even though the stock price fluctuated between 19 and 45 dollars during that window. Once the lock-up period ended, massive sell-offs occurred as insiders rushed to diversify their holdings.
Etymology
LOCK-UP (restricted, held) PERIOD (duration of time). A PERIOD where shares are LOCKED UP and cannot be sold.
Common Misspellings
Track markets & get real-time stock data
Related Terms
More in markets
Other markets terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.