A predetermined period after an IPO during which certain shareholders, typically insiders and early investors, are prohibited from selling their shares. It prevents immediate large-scale selling that could destabilize the newly public stock.
'Lockup' combines 'lock' from Old English 'loc' (fastening) and 'up' (enclosed). This practice developed alongside modern IPO procedures in the mid-20th century to ensure orderly aftermarket trading and prevent market manipulation.
Lockup expirations can create dramatic stock price movements - sometimes called 'lockup cliffs' - as millions of previously restricted shares suddenly become sellable. Smart investors track these dates because they often create buying opportunities when insider selling pressures prices down!
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