Venture Capital and IPO Lockup Expiration: An Empirical Analysis

52 Pages Posted: 14 Sep 2000

See all articles by Bradford D. Jordan

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

Daniel Bradley

University of South Florida

Ivan C. Roten

Appalachian State University - John A. Walker College of Business

Ha-Chin Yi

Texas State University, San Marcos - Department of Finance and Economics

Abstract

Most initial public offerings (IPOs) feature so-called "lockup" agreements, which bar insiders from selling the stock for a set period following the IPO, usually 180 days. We examine stock price behavior in the period surrounding lockup expiration for a sample of 2,529 firms over 1988 to 1997. We find that lockup expirations are, on average, associated with significant, negative abnormal returns, but the losses are concentrated in firms with venture capital (VC) backing. For the VC-backed group, the largest losses occur for "high-tech" firms and firms with the greatest post-IPO stock price increases, the largest relative trading volume in the period surrounding expiration, and the highest quality underwriters.

JEL Classification: G2, G3

Suggested Citation

Jordan, Bradford D. and Bradley, Daniel and Roten, Ivan C. and Yi, Ha-Chin, Venture Capital and IPO Lockup Expiration: An Empirical Analysis. Available at SSRN: https://ssrn.com/abstract=238714 or http://dx.doi.org/10.2139/ssrn.238714

Bradford D. Jordan (Contact Author)

University of Florida ( email )

Gainesville, FL 32611
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Daniel Bradley

University of South Florida ( email )

Tampa, FL 33620
United States

Ivan C. Roten

Appalachian State University - John A. Walker College of Business ( email )

Department of Finance, Banking, and Insurance 3066 Raley Hall
Boone, NC 28608
United States
828.262.6943 (Phone)
828.262.6612 (Fax)

Ha-Chin Yi

Texas State University, San Marcos - Department of Finance and Economics ( email )

601 University Drive
San Marcos, TX 78666
United States
512-245-3251 (Phone)

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