The Expiration of IPO Share Lockups

44 Pages Posted: 14 Feb 2000

See all articles by Laura Casares Field

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Gordon R. Hanka

University of Texas at Austin - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2000

Abstract

We examine 3,217 share lockup agreements that prevent insiders from selling shares immediately after the IPO. In the week the lockup agreements expire, we find a permanent 40 percent increase in average trading volume, and a statistically prominent cumulative abnormal return of -1.8 percent. The abnormal return is not quickly reversed, is stable over our ten year sample period, and is not due to changes in the proportion of trades at the bid price. The abnormal return is much more pronounced when the firm is venture financed, and we find that venture funds sell more aggressively than other pre-IPO shareholders. Prior to the scheduled expiration day, we find that six percent of lockup agreements are abrogated by substantial insider share sales.

JEL Classification: G00, G24, G3

Suggested Citation

Field, Laura Casares and Hanka, Gordon R., The Expiration of IPO Share Lockups (January 14, 2000). Available at SSRN: https://ssrn.com/abstract=205011 or http://dx.doi.org/10.2139/ssrn.205011

Laura Casares Field (Contact Author)

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Gordon R. Hanka

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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