Market Trends 2023/2024: Lock-Up Agreements

This practice note discusses lock-up agreements between underwriters or placement agents, on one hand, and issuers, their directors, officers, and control persons, on the other hand, in connection with offerings of securities. It covers the following topics: the length of the lock-up period, lock-up parties, lock-up agreement terms and carveouts, issuer lock-up agreements, releases, termination, and considerations relating to IPO lock-ups in the context of pre-IPO private offerings. Lock-up periods are most commonly 180 days, although in some cases companies will shorten it or create different lock-up periods for different types of securityholders. Common terms include a prohibition against any disposition of the issuer’s securities, securities convertible into issuer securities, or rights; swap and similar arrangements; hedging transactions; and transactions requiring the lock-up party to register their securities. Several exceptions, including gifts and transfers to trusts, modify these terms. Less common carve-outs tend to address certain types of securityholders, such as broker-dealers and investment advisors, transactions pursuant to a court or regulatory agency order, business combination transactions, or Rule 10b5-1 plans. Issuers have carve-outs related to conducting the offering. Releases are granted by the lead book runner or joint book runners and must be preceded by a press release.