IPO lockups

Doug Henwood dhenwood at panix.com
Wed Mar 22 09:28:35 PST 2000


[lots of lockups are starting to expire...]

"The Expiration of IPO Share Lockups"

BY: LAURA CASARES FIELD

Penn State University

GORDON HANKA

Penn State University

Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=205011

Date: January 14, 2000

Contact: LAURA CASARES FIELD

Email: Mailto:lcf4 at psu.edu

Postal: Penn State University

Smeal College of Business

609D BAB I

University Park, PA 16802 USA

Phone: (818)865-1483

Fax: (818)865-3362

Co-Auth: GORDON HANKA

Email: Mailto:ghanka at psu.edu

Postal: Penn State University

University Park, PA 16802 USA

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



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