The lock-up period is determined by the underwriters of the Initial Public Offering (IPO) and is agreed upon between the underwriters and the company. The lock-up period is typically 180 days, although it can vary depending on the size and nature of the IPO.

During the lock-up period, certain shareholders, such as company insiders and institutional investors, are prohibited from selling their shares in the company. The purpose of the lock-up period is to prevent a flood of shares from hitting the market immediately after the IPO, which could cause the share price to decline and harm investor confidence.

The implications of the lock-up period for investors and the company are as follows:

For investors:

The lock-up period can create a scarcity of shares available for trading, which can increase demand and potentially drive up the share price.

The end of the lock-up period can lead to increased selling pressure, as shareholders who were previously locked up are now able to sell their shares. This increased selling pressure can cause the share price to decline.

For the company:

The lock-up period can help to stabilize the share price in the immediate aftermath of the IPO by preventing a flood of shares from hitting the market.

The end of the lock-up period can signal to the market that insiders and institutional investors are not confident in the company’s prospects, which can negatively impact investor sentiment and harm the company’s reputation.

Overall, the lock-up period is an important component of the IPO process that can have significant implications for both investors and the company. Investors should be aware of the lock-up period and its potential impact on the share price, while companies should carefully consider the length of the lock-up period and its potential implications for their reputation and investor confidence.