You bought secondary shares in a company two years ago through a private market marketplace. The IPO finally happened. Congratulations — you now hold publicly traded stock. But you cannot sell yet. If you're still building foundational context on how pre-IPO investing transitions into post-IPO liquidity events, review the complete guide to pre-IPO investing before evaluating lock-up strategies. A lock-up agreement, typically 90 to 180 days long, sits between you and the open market. What you do during that window matters more than most investors realize.
What a lock-up is and why it exists
A lock-up is a contractual restriction — embedded in your purchase agreement or the company's shareholder agreement — that prevents you from selling publicly traded shares for a specified period after an IPO. The restriction protects the company and its underwriters. If every pre-IPO holder dumped shares simultaneously on the first trading day, price discovery would become chaotic and the IPO would likely price poorly for everyone involved.
Lock-ups are not securities law requirements. They are private contracts, negotiated between the company (or its underwriters) and existing shareholders. The standard term is 180 days from the IPO date, but 90-day and 120-day periods exist, and some companies have experimented with staggered release schedules that let different shareholder classes sell at different times.
If you hold shares through a Special Purpose Vehicle — the most common structure in secondary marketplaces — the lock-up applies to the SPV's shares, and the SPV manager controls the decision of when and how to sell after expiry. Confirm before you buy how distributions will be handled and on what timeline.
The early-release scenario buyers often miss
Underwriters can and sometimes do waive lock-ups early. This is called an early release or early unlock. It tends to happen when the stock has traded significantly above the IPO price and the underwriting bank believes the market can absorb additional supply without a sharp decline. The decision is entirely at the underwriter's discretion. You will almost never receive advance notice.
The practical implication: do not build a tax or liquidity plan that depends on knowing the exact date you can sell. Build in a range. If your lock-up is 180 days, model for any date between day 90 and day 180.
What typically happens to share price around expiry
Academic research on lock-up expiries is consistent: share prices tend to drift down in the weeks leading up to expiry as short sellers anticipate incoming supply, and then recover over the following weeks once that supply has been absorbed. The magnitude varies by company, by how much of the float is held by pre-IPO investors, and by broader market conditions at the time.
This does not mean you should always sell the day the lock-up expires. It means you should make a deliberate choice rather than defaulting to inaction. The three decisions most investors face are: sell immediately on expiry, sell in tranches over 30 to 60 days, or hold based on a longer-term thesis on the company.
- Selling immediately removes price risk but may hit a short-term low if the market is already pricing in supply pressure.
- Selling in tranches (a 10b5-1 plan structure) averages your exit price but requires the plan to be set up before you are in possession of material non-public information.
- Holding beyond expiry means you are now a public-market investor, subject to full mark-to-market volatility, with no special information advantage over institutional buyers.
The blackout complication
Here is where many pre-IPO buyers are caught off guard. The lock-up lifts — but a company blackout period begins two weeks later because earnings are approaching. You now have a narrow selling window between expiry and the start of the blackout. If you have not pre-arranged a selling plan, that window can close before you act.
Rule 10b5-1 plans are the standard answer. These are written trading plans established when you are not in possession of material non-public information — usually well before the lock-up lifts. The plan specifies price, volume, and timing conditions for sales, and because it is pre-arranged, it provides an affirmative defense against insider trading allegations even if you later come into possession of MNPI. Setting one up requires a securities attorney and, in some cases, company approval.
SPV holders: your path to liquidity is not direct
If you invested through a secondary marketplace via an SPV, you do not hold the underlying shares personally. The SPV holds them. The SPV manager — not you — has the authority to execute a sale or distribution. Some managers distribute shares in-kind to SPV members after the lock-up lifts, allowing each investor to sell independently. Others sell the entire position at the fund level and distribute cash. The difference in tax treatment, timing, and price achieved can be significant.
Ask the following questions before you close any SPV-based secondary purchase: Does the manager distribute shares or cash? What is the target timeline for distribution after lock-up expiry? Are there any additional holding-period restrictions in the SPV operating agreement? What fees or carry apply to the distribution? Getting these answers in writing before you invest is the only way to plan accurately.
The secondary-market option before IPO
If you are holding pre-IPO shares and do not want to navigate the lock-up at all, there is an alternative: sell your position on a secondary marketplace before the IPO. Secondary buyers are often willing to acquire pre-IPO shares even in the final months before a listing, pricing in both the anticipated IPO value and the lock-up drag they will have to bear. You give up potential upside. You gain certainty and immediate liquidity.
Whether that trade-off makes sense depends on your basis, your tax situation, your view of the company's post-IPO trajectory, and how much the lock-up uncertainty costs you in terms of capital that could be deployed elsewhere. There is no universal right answer — but it is a real option that many holders overlook.
If you are currently holding pre-IPO shares in any of the 28 issuers on our marketplace and want to understand what a secondary exit looks like before an IPO event, visit /sell to see current bid indications and get a no-obligation quote.