Venture Capital and IPO Lockup Expiration: An Empirical Analysis
Bradford D. Jordan
University of Kentucky - Gatton College of Business and Economics
Daniel J. Bradley
University of South Florida
Ivan C. Roten
Appalachian State University - John A. Walker College of Business
Texas State University, San Marcos - Department of Finance and Economics
Journal of Financial Research
Most initial public offerings (IPOs) feature so-called "lockup" agreements, which bar insiders from selling the stock for a set period following the IPO, usually 180 days. We examine stock price behavior in the period surrounding lockup expiration for a sample of 2,529 firms over 1988 to 1997. We find that lockup expirations are, on average, associated with significant, negative abnormal returns, but the losses are concentrated in firms with venture capital (VC) backing. For the VC-backed group, the largest losses occur for "high-tech" firms and firms with the greatest post-IPO stock price increases, the largest relative trading volume in the period surrounding expiration, and the highest quality underwriters.
Number of Pages in PDF File: 52
JEL Classification: G2, G3Accepted Paper Series
Date posted: September 14, 2000
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