Prop Ups During Lockups
68 Pages Posted: 14 Oct 2008 Last revised: 16 Mar 2011
Date Written: March 1, 2011
The end of the lockup period for initial public offerings generally constitutes the first time corporate insiders sell significant numbers of shares on the market. I test the hypothesis that shareholders pressure analysts to support the share price until the end of the lockup period. In a sample of U.S. initial public offerings from 1996 to 2006, I find that analysts issue overly optimistic recommendations until the end of the lockup period. Furthermore, I find a significant downward revision of recommendations for the whole sample of firms as soon as the lockup period ends.
Keywords: IPO, booster shots, lockup period, analyst behaviour
JEL Classification: G14, G24
Suggested Citation: Suggested Citation