medium · Investment Banking
What is the primary purpose of a 'Lock-Up Period' following an IPO?
- To give the company additional time following the offering to fully repay the underwriting fees owed to its initial IPO banks.
- To formally guarantee that the newly public company will successfully meet its very first quarterly earnings target.
- To stop brand-new public investors, not insiders, from selling their freshly purchased shares for six months.
- To prevent insiders from flooding the market with shares immediately after the IPO, which could crash the stock price.
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