What Is an IPO Lock-Up Period (and Why Stocks Often Drop When It Ends)
What an IPO lock-up period is, how long it lasts, why share prices often fall around the expiration date, and how SpaceX used a staged lock-up in 2026.
An IPO lock-up period is a stretch of time after a company goes public, usually 90 to 180 days, when insiders such as founders, employees and early investors are not allowed to sell their shares. When it ends, millions of new shares can suddenly hit the market, and the stock price often feels the pressure.
Why lock-ups exist
At an IPO, only a small slice of a company's shares is sold to the public. Insiders often own the large majority. If they could all sell on the first day, the price could collapse. So the investment banks running the IPO ask insiders to sign a lock-up agreement promising not to sell for a set period. It is a contract, not a law, but it is standard practice and is disclosed in the company's S-1 filing with the SEC.
How long a lock-up lasts
- 180 days is the most common length.
- Some companies use 90 days, or a shorter period for part of the shares.
- More and more large IPOs use staged lock-ups: shares unlock in pieces, sometimes tied to earnings reports or to the stock trading well above its IPO price.
- Founders and controlling shareholders may agree to longer lock-ups, such as one year.
You can find the exact terms in the "Shares Eligible for Future Sale" and "Underwriting" sections of the S-1 or final prospectus on the SEC's EDGAR website.
Why stocks often fall around lock-up expiration
- Supply jumps. The number of shares that can trade may double or triple overnight.
- Insiders want to diversify. Employees who have waited years often sell some shares to pay taxes, buy a house or spread out their risk.
- Traders front-run it. Because the date is public, some traders sell or short the stock in the weeks before, so the drop often starts early.
Academic studies have found that, on average, IPO stocks show abnormal declines of a few percent around lock-up expiration. But the effect varies a lot. If insiders hold, or if strong earnings land at the same time, the stock can rise instead.
Case study: SpaceX's staged lock-up in 2026
SpaceX (ticker SPCX) went public on June 12, 2026 at $135 a share. Instead of one 180-day cliff, its insiders' shares unlock in stages:
| Date | What unlocked | How the stock reacted |
|---|---|---|
| Aug 6 | Earnings-linked tranche, about 911 million shares (~$123 billion) | Opened near a record low around $105, closed up about 6%, back at the $135 IPO price by Aug 10 |
| Aug 20 | Day-70 tranche, about 319 million shares | Fell about 4% |
| Sep 9 | Day-90 tranche | Fell 3.9% to $147.55 |
| Sep 24 | Day-105 tranche | Fell about 4% the session before |
| Oct 9 and Oct 24 | Day-120 and day-135 tranches | Further scheduled releases |
| Dec 8 | Full 180-day expiry, about 800 million remaining shares | Upcoming |
| June 2027 | Elon Musk's separate one-year lock-up, over 6 billion shares | Upcoming |
The lesson: each unlock caused a dip of a few percent, but the biggest one was absorbed because demand was strong. Staging the releases spread the selling out instead of concentrating it on one day.
What investors can do with this
- Check the date before buying a recent IPO. If a large unlock is weeks away, you may get a better price after it.
- Look at how many shares unlock compared with the shares already trading (the "float"). A small float and a big unlock is the riskiest mix.
- Watch insider filings. Sales by executives are reported on SEC Form 4. Heavy selling is a signal; light selling is reassuring.
- Don't try to trade it if you are a long-term investor. A temporary dip matters little over five or ten years.
Frequently asked questions
Can a lock-up period end early?
Yes. Underwriters can release shares early, and many recent lock-ups include automatic early releases if the stock trades well above the IPO price for a set number of days or after the first earnings report. These terms are disclosed in the prospectus.
Do employees have to sell when the lock-up ends?
No. The end of a lock-up only means insiders are allowed to sell. Many keep most of their shares, and company executives often sell gradually under pre-arranged trading plans known as 10b5-1 plans.
Where can I find a company's lock-up expiration date?
Look in the final prospectus (the 424B filing) or the S-1 on the SEC's EDGAR database, under the underwriting and shares eligible for future sale sections. Financial news sites and IPO calendars also track upcoming expirations.
Should I sell my IPO shares before the lock-up ends?
It depends on your reason for owning the stock. Short-term traders sometimes sell ahead of expirations, but a long-term investor who believes in the business usually gains little from trying to time a move of a few percent.
Key takeaways
- A lock-up stops insiders from selling for usually 90 to 180 days after an IPO.
- When it expires, extra supply often pushes the price down a few percent, sometimes before the date.
- Large 2026 IPOs like SpaceX used staged lock-ups; SpaceX's full 180-day expiry is December 8, 2026.
- Terms are in the S-1; insider sales show up on SEC Form 4.
New to IPOs? Start with how IPOs work and how to buy IPO stock, and see what happened to SpaceX stock after its IPO.
Sources
- SEC: Investing in an IPO
- SpaceX lockup expiration schedule (updated September 24, 2026)
- Dealroom: Upcoming and recent IPOs
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