IPO Lock-In Agreements in the UK

Posted: 19 Feb 2002

See all articles by Susanne Espenlaub

Susanne Espenlaub

University of Manchester - Division of Accounting and Finance

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Abstract

When a company offers shares in an initial public offering (IPO), existing owners often enter into lock-in agreements prohibiting them from selling shares for a specified period after the IPO. There is some recent U.S. evidence of predictable share-price movements at the time of expiry of these lock-in periods. Using a sample of 188 firms, 83 classified as high-tech and 105 others, that went public on the London Stock Exchange (LSE) during 1992-1998, we focus on the characteristics of lock-in agreements in the UK and on the behavior of stocks returns around the lock-in expiry date. We find that the lock-in contracts of LSE-listed firms are much more complex, varied and diverse than U.S. contracts, which usually standardize the lock-in period at 180 days after the IPO. We also find evidence of negative abnormal stock returns at and around lock-in expiry of similar magnitude to those reported in U.S. studies. However, these abnormal returns are typically not statistically significant. While the deterioration in stock returns immediately around the expiry date appears to be much more particularly pronounced for high-tech stocks than for others, the differences in performance are not statistically significant.

Keywords: Initial Public Offerings, Lock-in, High-Tech

JEL Classification: G24, G34

Suggested Citation

Espenlaub, Susanne K. and Goergen, Marc and Khurshed, Arif, IPO Lock-In Agreements in the UK. Available at SSRN: https://ssrn.com/abstract=298159

Susanne K. Espenlaub (Contact Author)

University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
44 161 275 4026 (Phone)

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

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