The Expiration of IPO Share Lockups

Posted: 2 Oct 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

Abstract

We examine 1,948 share lockup agreements that prevent insiders from selling their shares in the period immediately after the IPO (typically 180 days). While lockups are in effect, there is little selling by insiders. When lockups expire, we find a permanent forty percent increase in average trading volume, and a statistically prominent three-day abnormal return of -1.5 percent. The abnormal return and volume are much larger when the firm is financed by venture capital, and we find that venture capitalists sell more aggressively than executives and other shareholders. We find limited support for several hypotheses that may explain the abnormal return, but no complete explanation.

Keywords: Initial public offerings, market efficiency, downward-sloping demand curves, lock-up agreements, underwriters, venture capitalists

JEL Classification: G14, G24

Suggested Citation

Field, Laura Casares and Hanka, Gordon R., The Expiration of IPO Share Lockups. Journal of Finance. Available at SSRN: https://ssrn.com/abstract=236029

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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