"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