What Happens to a Stock Price When the IPO Lockup Period Ends?

For the first months after an IPO, the shares trading on the exchange are usually a small slice of the company. The rest belongs to founders, employees and investors who are not allowed to sell yet. The day that changes is circled on many traders' calendars.

What people on X are asking

In January 2026 one investor replied to a well-known short seller that an IPO typically floats a small part of a company and the lockup expiry is when the real supply comes online. In June 2024 another user reminded a follower that lockup expiration is typically six months after an IPO. The "10%" float figure in the first post varies widely by deal, but the supply logic is right, as the research below shows.

The fact-checked answer

What a lockup is. Investor.gov explains that lockup agreements prohibit company insiders, including employees, their friends and family, and large shareholders, from selling their shares for a set period after an IPO. Insiders and the underwriter usually sign them before the listing. Terms vary, but most prevent sales for 180 days, and some limit how many shares can be sold over a period. US securities law requires the company to disclose the terms in its registration documents, including the prospectus, and Investor.gov notes that a stock price may drop in anticipation of locked-up shares being sold.

What the research found. A study published in the Journal of Finance in 2001 examined 1,948 lockup agreements. While lockups were in effect, insiders sold very little. At expiry, the authors found a permanent 40% increase in average trading volume and a statistically significant three-day abnormal return of −1.5%. Both effects were much larger for venture-capital-backed firms, and venture capitalists sold more aggressively than executives or other holders. The authors found limited support for several explanations and no complete one. Later studies in other markets have reported similar negative reactions.

UXS decision diagram

Is a lockup expiry likely to matter for this stock?

Text version of the diagram

1. Is the number of shares being unlocked large compared with today's float? If no: Small release: usually a minor event
2. Are early investors (venture or private equity) sitting on big gains? If no: Less incentive to sell quickly
3. Is the release all at once rather than staged? If no: Staged releases spread the supply
4. Has the price not already fallen in the weeks before? If no: Some of the selling may be priced in
5. Otherwise: Expect heavier volume and a higher chance of a dip around the date

Diagram drawn by UXS. A simplified decision aid for education, not a recommendation.

Why the price can dip even though the date is public. In an efficient market, a known date should be priced in. Explanations include limited ability to short-sell new IPOs, which makes it hard to bet ahead of the event, and the fact that insider sales send a signal about what insiders think. Whatever the cause, the average effect is small but persistent.

What to look up before a lockup expiry

Investor.gov advises checking whether insiders have a lockup and when it expires before investing in a recent IPO. Tap a column header to sort.

Item	Where to find it	Why it matters
Expiry date and length	Prospectus, "Shares eligible for future sale"	The date the supply can arrive
Shares released vs current float	Prospectus and latest 10-Q	A release several times the float is a big event
Who holds the locked shares	Prospectus ownership table	Venture funds tend to sell sooner
Staged or early release terms	Lockup section of the prospectus	Early releases can be tied to price or earnings
Insider sale filings after expiry	Form 4 and Form 144 on EDGAR	Shows who actually sold

After the lockup, other rules still apply. Unregistered shares held by insiders are often "restricted securities". Under SEC Rule 144 they can be resold after a holding period, generally six months for companies that file current reports and one year otherwise, while affiliates also face volume limits and notice filings. Officers and directors also file Form 4 within two business days of trades; see how to read a Form 4.

For traders. Expiry days often bring a pickup in volume and volatility, not a guaranteed drop. Shorting into the date is crowded and borrow can be expensive, as covered in how short selling works. Long-term holders mostly need to know the date and avoid being surprised. New share sales by the company itself are a different event; see why a stock drops when a company issues new shares.

Decision helper

Related reading: what a short squeeze is, what market cap is and why trading in a stock gets halted.

Common mistakes

• Assuming every stock falls on lockup day.
• Ignoring early-release clauses in the prospectus.
• Forgetting the float is small before expiry, so prices can swing more.
• Shorting a recent IPO without checking borrow costs.

FAQ

How long is an IPO lockup period?

Most last 180 days, but terms vary and are disclosed in the prospectus.

Do stocks always fall when the lockup expires?

No. On average the three-day effect was about −1.5% in a large study, with wide variation.

Why does volume rise after lockup expiry?

More shares are free to trade; the study found a permanent 40% rise in average volume.

Can insiders sell before the lockup ends?

Only if the agreement allows an early release or the underwriter waives it.

Where do I find the lockup date?

In the IPO prospectus on SEC EDGAR, under the lockup and shares-eligible-for-sale sections.

Does a lockup expiry affect long-term returns?

The study found a short-term dip; long-term results depend on the business.