![]() ![]() Additionally, the lock-up period is different for each investment, reducing the chances of an extensive liquidation at one time. This will result in lower investments and even lower returns. When there is no lock-up period or a redemption schedule, the manager of the fund will need a lot of cash available. ![]() A lockup period is when company insiders, such as employees granted stock options or executives who own shares, sign an agreement that prohibits them from selling shares for a specified period of time. Usually, there is a notice given 30-90 days prior so the fund manager can liquidate them, allowing the payment to investors. Often, fluctuations in stock prices occur following an IPO, due to the expiration of a lockup period. When this time period ends, the holder of the securities will be permitted to redeem them on a set schedule. The purpose of the lock-up period is to prevent the stock price from falling due to a high supply and helps the company maintain the share price. A lockup period typically applies to insiders like managers, employees, owners, founders, etc. A lock-up period is a period of time after an IPO during which insiders, such as company executives and large shareholders, are prohibited from selling. In the case of an IPO, the lock-up period helps keep the issuer’s business model intact, allowing them to continue growing by retaining more cash. The main purpose of the lock-up period is to prevent investors who may have a large number of shares from oversaturating the market with an influx of shares. The lock-up period for hedge funds is generally 30-90 days, which provides the investor time to exit from the investment without having a significant impact on their portfolio due to price changes. For hedge funds, this time period is given so that the investor can exit from illiquid or unbalanced investments in their portfolio. For a lock-up period, the two main uses are for startups/IPOs and hedge funds. A lock-up period is a certain time period in which you are not permitted to sell or redeem your shares. ![]()
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