📚 Stock Market Glossary
Clear, beginner-friendly explanations, real-world analogies, and visual formulas for key stock market terminology.
Lockup Period
Corporate & Tech💡 Key Takeaway: A contractual restriction preventing company insiders, founders, and early institutional investors from selling their shares for a set period after an IPO.
Condo Resale Ban Analogy: A mandatory lockup is like a 1-year resale restriction on a newly built condo to prevent early flippers from dumping properties and causing price crashes.
😎 10-Second Show-off Pro Tip for Friends!
😎 Show-off Tip: Say, 'Always mark lockup expiration dates on your calendar! Post-IPO overhang risk frequently creates sharp 10-20% dips as insiders monetize gains.'
📖 Beginner-Friendly Explanation
STEP 1
Core Concept & Meaning
A Lockup Period contractually binds insiders, founders, and early institutional investors from liquidating their holdings for a designated window (e.g. 1, 3, or 6 months) post-IPO.
STEP 2
Why It Matters & Mechanism
This protects retail investors from early insider dumping.
STEP 3
Practical Investment Tips & Pitfalls
When a lockup period expires, a sudden influx of tradeable shares hitting the market can cause sharp downward pressure on the stock price (overhang risk).
📊 Impact on mandatory holding commitment (protection reserve) volume
Mandatory holding release rate = (number of shares released from reserve ÷ total number of outstanding shares) × 100
▶ If the volume released is greater than 20-30%, strong downward pressure will occur on the stock price
⚖️ Key Comparison at a Glance
| Category | Mandatory retention commitment maintenance period (Lockup) | Expiration |
|---|---|---|
| Whether stocks can be sold | Absolutely impossible to sell (account frozen) | Free to sell at market price! |
| Number of shares outstanding in market | It is locked, so the number of shares in circulation is small (scarcity) | Large-scale inflow into the market (increased distribution volume) |
| Impact on stock price | Helps maintain stock price during initial listing | Risk of stock price decline due to concerns over overhang (mass selling) |
📌 Practical Market & Real-World Example
As a newly listed tech stock reached its 3-month lockup expiration, institutional insider selling drove an 8% drop.