Glossary · Defined term
Lockup period
A lockup period is the post-IPO window, usually several months, during which insiders cannot sell their shares.
Last updated Oct 2, 2026
What it means
A lockup period is a window after an IPO during which insiders, employees, and early investors are barred from selling their shares. It typically lasts several months and exists to prevent a flood of insider selling from crushing the newly public stock in its first days of trading. The restriction is written into the underwriting agreement.
The expiration of a lockup is a closely watched event because it suddenly expands the pool of potential sellers. Even when insiders have no plans to sell, the market often prices in the risk, and stocks frequently drift lower into the expiry date. Actual selling after expiry can then extend the decline.
Lockups are a feature of traditional IPOs; direct listings usually have little or no lockup, which is one reason their early trading can be more volatile. For investors, the lesson is to check the calendar: a stock with a lockup expiring next month faces a known supply overhang that has nothing to do with the business itself.
An example
For illustration, a stock IPOs in March with insiders locked up for six months. As September approaches, the shares sag on fears of insider selling, even though the company's results have not changed.