Lock-up agreements are generally associated with underwriting agreements – they are designed to protect investors who purchase shares from an initial public offering (IPO). Lockup agreements govern the activity of company insiders by prohibiting them (and their associates, including employees to friends and family) from immediately selling their shares on the open market once the company goes public. Usually, lockup agreements cover a period of 180 days – and, normally this type of agreement is expressed as a written clause in an underwriting agreement. Additionally, lockup agreements may dictate the number of shares which may be sold over a given period for time.
“U.S. securities laws require a company using a lockup to disclose the terms in its registration documents, including its prospectus.” (SEC.gov)
Why do lock-up clauses matter to investors? Because the date of the termination of the lock-up agreement might impact the stock price. Sometimes, the approach of the date may drive the price down if it is anticipated that company insiders will sell as soon as the lock-up agreement ends.
One of the best ways to learn about lock-up clauses and the varying terms they may contain is to read a variety of them. RealDealDocs allows you to do this – our database of millions of actual business documents also includes clauses.
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Here are several lock-up clauses currently available on RealDealDocs.com:
Lock-up Period; Lock-up Letters
Lock-up Period; Lock-up Letters. Underwriting Agreement
Lock-up Period; Lock-up Letters.