Lock-Up Agreement

Term Main definition
Lock-Up Agreement

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.