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    Lock-Up Period

    A contractually specified period after an IPO or acquisition during which insiders and pre-existing stockholders are restricted from selling their shares.

    Reviewed by Christian Espinosa, Founder, Blue Goat CyberLast reviewed September 19, 2026

    Definition

    A lock-up period is a contractual restriction, typically negotiated with the underwriters in connection with an initial public offering or included in a merger agreement, that prohibits officers, directors, founders, and other significant pre-IPO or pre-acquisition stockholders from selling, transferring, or hedging their shares for a defined period, commonly 180 days after an IPO. The purpose is to prevent a flood of insider selling immediately after a liquidity event from depressing the share price and to signal insider confidence in the company's post-event prospects. Lock-up agreements are typically disclosed in the IPO prospectus filed with the SEC and can include partial early-release provisions tied to trading price thresholds or the passage of specified time intervals.

    What this means in practice

    For a MedTech company completing an IPO shortly after a pivotal trial readout or a first product launch, the lock-up period matters because early post-launch commercial and reimbursement data (initial sales trends, payer coverage decisions) often become public during the lock-up window and can move the stock significantly before insiders, including founders and early employees, are permitted to sell any shares.

    Examples

    • A MedTech company completes its IPO at $18 per share. Under a standard 180-day lock-up, a founder holding 2,000,000 shares cannot sell any shares until day 181 post-IPO, regardless of whether the stock is trading at $30 or $10 per share during that window.
    • An underwriter includes an early-release provision permitting up to 25 percent of locked-up shares to be sold after 90 days if the stock has traded at least 25 percent above the IPO price for 10 consecutive trading days. If the stock trades at $23 or higher (about 28 percent above the $18 IPO price) for that period, the founder in the example above could sell up to 500,000 shares starting on day 91 instead of waiting the full 180 days.
    Common pitfalls
    • •Assuming lock-up periods are uniform across all pre-IPO stockholders; employees, founders, and different investor classes can be subject to different lock-up lengths or early-release terms.
    • •Overlooking that a lock-up expiration date is public information often anticipated by the market, and share prices sometimes decline in the days before expiration due to expected selling pressure.
    • •Confusing an IPO lock-up with a separate M&A lock-up or escrow arrangement, which may impose different (and sometimes longer) restrictions tied to indemnification holdbacks rather than market stabilization.

    Frequently asked questions

    The underwriters in an IPO typically enforce the lock-up agreement directly with each signing stockholder, and the company's transfer agent will not process a sale that would violate the lock-up.

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    Sources

    3 sources

    Every citation below opens the original document. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.

    Tier 1Binding law and standards· 1Tier 2Regulator guidance and consensus· 2
    Link health: 3 unchecked· last checked 2026-06-20
    SEC Investor.gov·1SEC·1Cornell Law LII·1
    1. 1
      SEC Investor.gov: Lock-Up Agreement
      Tier 2 Unchecked
      SEC Investor.govinvestor.gov
    2. 2
      SEC: Initial Public Offerings
      Tier 2 Unchecked
      SECsec.gov
    3. 3
      Cornell LII: Initial Public Offering
      Tier 1 Unchecked
      Cornell Law LIIlaw.cornell.edu

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