Underwriter Lock-up Releases, Initial Public Offerings and After-Market Performance

Terrill R Keasler

The Financial Review, 2001, vol. 36, issue 2, 1-20

Abstract: The lock-up agreement between an underwriter and an issuing firm's principals prohibits sale of securities for a period of time following the offering date. Investment banks must support the stock following an offering. The lock-up assures investors that the restricted shares will not enter the market, at least for a period of time. Negative abnormal returns prior to the lock-up release show that unrestricted investors liquidate positions prior to the scheduled lock-up release. Negative abnormal returns are more robust for firms that are not influenced by SEC Rule 144 than for firms that are. Copyright 2001 by MIT Press.

Date: 2001
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