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Why do IPO's have multiple lockout periods
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Why do IPO's have multiple lockout periods

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Why do IPO's have multiple lockout periods

Hi there

Why do IPO's (Facebook) have multiple lockout periods? In the news people are saying FB shares were all time lows because of the 1st lockout period, and I think they have a further 2 more lockout persiods to come.

1. So why have multiple lockout periods (Who says I want 3 lockout periods) ?
2. Who determines how long the lockout periods are ?


Many thanks

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tellytub View Post
1. So why have multiple lockout periods (Who says I want 3 lockout periods) ?
2. Who determines how long the lockout periods are ?

The answer lies with the IPO organizing banks and reads simply "RISK"

The banks organize the IPO, and calculate a stable price development after the IPO.
So the programmed lockout periods (here FB) are made in reverse sort of risk aversion:
1st lockout: for the involved banks (they hate the higher risk over time)
2nd lockout: for employees (they have to stay and guarantee for the ongoing business and do have little rights for the IPO)
3rd lockout: for the second half of their stocks (highest risk). The first half they already sold
for the guaranteed IPO price on IPO day.

Each IPO is differently organized - so the strongest partners dictate if or how many lockouts and their periods will be.

GFIs1

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GFIs1 View Post
The answer lies with the IPO organizing banks and reads simply "RISK"

The banks organize the IPO, and calculate a stable price development after the IPO.
So the programmed lockout periods (here FB) are made in reverse sort of risk aversion:
1st lockout: for the involved banks (they hate the higher risk over time)
2nd lockout: for employees (they have to stay and guarantee for the ongoing business and do have little rights for the IPO)
3rd lockout: for the second half of their stocks (highest risk). The first half they already sold
for the guaranteed IPO price on IPO day.

Each IPO is differently organized - so the strongest partners dictate if or how many lockouts and their periods will be.

GFIs1

thanks GFIs1, really interesting that was

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