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Finance Glossary

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Lockup Provision


In most IPOs, there is a required lock up provision for insiders. Those people are the earliest investors in the company, its senior management and others of similar ilk. The required lock up is an integral part of the 144a laws which tried to prevent insiders from dumping their shares on the unknowing public 5 minutes after the stock went public - and they knew that the company was a total dog who'd miss its earnings numbers but a lot. For most lock ups, the provision is a minimum of 6 months' hold time before insiders can sell.