GLOSSARY // Market Structure
Lockup Expiration
Lockup expiration is the date insiders and pre-IPO investors become free to sell shares they were contractually barred from selling after a company's debut — typically 90-180 days post-IPO. On that date, the supply of sellable stock can jump from the IPO float to several times that.
The lockup is an underwriter-imposed agreement, not a law, designed to keep insiders from dumping into the fragile early market. Because the date is disclosed in the IPO prospectus, the market sees it coming: stocks frequently soften in the week or two before expiration as traders front-run the supply, and heavily shorted or richly valued IPOs get hit hardest.
Not every expiration is a selloff. If the stock trades below the IPO price, insiders may sit tight, and some lockups release in staggered tranches that spread the supply out.
An IPO floats 15,000,000 shares in March at $20; insiders hold another 85,000,000 locked for 180 days. In September, days before expiration, the stock slips from $31 to $27 on rising short interest. On the expiration day 9,000,000 insider shares trade — six times normal volume — and the stock prints $24.80 before stabilizing.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.