On average, a modest dip and a lot more trading. Lockup agreements stop insiders, employees and early investors from selling for a set time after an IPO, most often 180 days, and the terms must be disclosed in the prospectus. When they expire, a much larger pool of shares can be sold.
A Journal of Finance study of 1,948 lockups found a statistically significant three-day abnormal return of about -1.5% around expiry and a permanent 40% rise in average trading volume, with bigger effects at venture-backed companies, where venture investors sold more aggressively. The dip is an average: some stocks fall far more, others barely move.
The expiry date is information, not a trade by itself. Position size still matters, because the average move hides a wide range of outcomes.
The link below is to our own site, where the study and the prospectus point are sourced in full: What Happens to a Stock Price When the IPO Lockup Period Ends?
Not financial advice.
A Journal of Finance study of 1,948 lockups found a statistically significant three-day abnormal return of about -1.5% around expiry and a permanent 40% rise in average trading volume, with bigger effects at venture-backed companies, where venture investors sold more aggressively. The dip is an average: some stocks fall far more, others barely move.
The expiry date is information, not a trade by itself. Position size still matters, because the average move hides a wide range of outcomes.
The link below is to our own site, where the study and the prospectus point are sourced in full: What Happens to a Stock Price When the IPO Lockup Period Ends?
Not financial advice.
