What is the primary purpose of a lockup agreement?

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Quizplus · Accepted Answer

The primary purpose of a lockup agreement is to ensure that company insiders, such as executives and directors, maintain an economic interest in the issuer of an IPO for a minimum period of time, typically 180 days. This is done to prevent insiders from selling their shares immediately after the IPO and flooding the market with additional shares, which could depress the price of the stock. The lockup period also provides an opportunity for the market to absorb the new shares and for the company to establish a track record as a public company before insiders are allowed to sell their shares.

What Is the Primary Purpose of a Lockup Agreement