CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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What is a lock-up period?

Lock-up period
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A lock-up period is a period of time where investors are forbidden from selling their shares after an initial public offering. It's a way of avoiding liquidity and upsetting the price of shares in that company.

Where have you heard about lock-up periods?

Lock-up periods are standard practice for any company when it's first set up. Early investors and employees are given the terms of the lock-up period in a contract.

What you need to know about lock-up periods.

The average lock-up period is somewhere between 90 and 180 days. After that, a shareholder can exercise the option to sell their shares and cash in the money. Lock-ups occur after an initial public offering – the first time the public gets the opportunity to invest in a private company.

The main purpose of a lock-up is to avoid shareholders – pre-IPO investors and employees – flooding the market. If that happens, share prices go down and affect other shareholders' positions. Lock-ups allow companies to adjust to the market and provide an opportunity to establish earnings reports for future investors to access.

Find out more about lock-up periods.

Lock-up periods are often one of the conditions of exercising an employee stock option. Read our guide to options here.

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