Lock-Up Agreement A legally binding contract between the underwriters and insiders of a company prohibiting these individuals from selling any shares of stock for a specified period of time. Lock-up periods typically last 180 days (six months) but can on occasion last for as little as 120 days or as long as 365 days (one year). Investopedia Says: Underwriters will have company executives, managers, employees and venture capitalists sign lock-up agreements to ensure an element of stability in the stock's price in the first few months of trading. When lock-ups expire, restricted people are permitted to sell their stock, which sometimes (if these insiders are looking to sell their stock) results in a drastic drop in share price due to the huge increase in supply of stock. Related Terms: Eating Stock Final Prospectus Gross Spread Gun Jumping Initial Public Offering - IPO Prospectus Red Herring Seasoned Security Underwriter |