Lock-Up Agreement
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Term
Main definition
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An agreement by an owner of capital stock not to sell his or her shares for a specified period of time. In connection with an IPO (or follow-on public offering), a lock-up agreement, required by the underwriters (or the lead or managing underwriter), prohibits management, VCs and other significant stockholders from selling their shares during a specified period following an IPO (usually six to nine months). Avoiding large sales of stock for some period following an IPO helps to build a base of support for, and manage and stabilize, the market for a public company's shares.
