What is a lookup period?

A lock-up period is a predetermined time frame during which corporate insiders, investors, and employees are restricted from selling their shares of a particular investment. There are two main uses for lock-up periods: those for hedge funds and those for start-ups/IPO’s.

1. For Hedge Funds:

• The lock-up period is intended to give the hedge fund manager time to exit investments that may be illiquid or otherwise unbalance their portfolio of investments too rapidly.
• Hedge fund lock-ups typically last between 30-90 days, providing the manager with enough time to manage their investments without the pressure of immediate redemptions.

2. For Start-ups/IPOs:

• The lock-up period helps show that company leadership remains intact and that the business model remains on solid footing.
• It also allows the IPO issuer to retain more cash for continuing growth by preventing a sudden flood of selling pressure from insiders when the stock is most vulnerable, which can help stabilize the stock price after the company goes public.

In conclusion, lock-up periods serve to protect the interests of the company and its investors by regulating the sale of shares during critical phases such as IPOs or when a company's stock is particularly vulnerable to market fluctuations.