Underwriter und Insider in IPOs agree on lock-ups to prevent insiders from opportunistically selling their shares in a certain time window. In the event of the sale of a controlling interest, the purchaser must temporarily consent to a blocking clause. It prohibits the resale of assets or shares for the duration of the agreed suspension period. This measure is intended to maintain price stability for other stakeholders. It is interesting to note that some of these studies have found that staggered locking agreements may actually have more negative effects on an action than those with a single expiration date. This is surprising, as staggered locking chords are often seen as a solution for post-lock-up dip. Locking agreements are worrisome for investors, as conditions can affect the share price. When closures expire, people with reduced mobility can sell their shares. If a significant number of insiders withdraw, the result could be a sharp fall in share prices. From a regulatory perspective, lockout agreements should help protect investors. The scenario that aims to avoid the lockout agreement is a group of insiders who take over an overvalued corporate audience and then throw it at investors as they flee with the revenue. For this reason, some Blue Sky laws still have blockages as a legal requirement, as this has been a real problem during several periods of market exuberance in the United States. Studies have shown that the expiration of a blocking agreement is usually followed by a period of unusual yields.
Unfortunately, these unusual returns are more common for investors in the negative direction. Companies that are hostile acquisitionsA hostile takeover, in the event of mergers and acquisitions (M-A), is the acquisition of a target company by another entity (called an acquirer) by a direct interest in the shareholders of the entity concerned, either through a takeover bid or by proxy vote. The difference between an enemy and a friendly sometimes explore a similar route. Restricted or “blocked” stakeholders may not sell their shares until after the banning period has expired. This avoids the opportunistic behavior of some insiders who want to sell the shares at a lower price. The goal of a lockout agreement is to prevent corporate insiders from throwing their shares at new investors in the weeks and months following the IPO. Some of these insiders could be early investors, such as venture capital firms, who made their purchases in the company when it was worth significantly less than its IPO value. They may therefore have a strong incentive to sell their shares and make a profit from their initial investment. A lock-in, lock-in or lockout period is a predetermined period after an IPO in which large shareholders, such as corporate executives and investors representing major syzudes, are excluded from the sale of their shares.
In general, a blackout period is a condition for the exercise of an employee action option. According to the company, the IPO ban period is generally between 90 and 180 days before these shareholders are granted the right, but not the obligation to exercise the option. The blocking agreement may contain additional clauses limiting the number of shares that can be sold for a certain period of time after the freezing agreement expires.