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Finance Glossary

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Lockup Provision

Definition:

In most IPOs, there is a lockup provision for insiders. Insiders—like executives and early investors—cannot sell their stocks for a specific period of time (usually 6 months or so). This provision makes sure that insiders can't use their knowledge to make trades of stock.

For example, if the executives of a company know that the company is headed down fast, they can't just offload their shares immediately to the public (who might not know the company's in trouble).