Definition
Lock-in (IPO)
Lock-in is a period after listing during which certain shareholders are barred from selling their shares.
Indian IPO rules impose lock-ins on promoters, anchor investors, and pre-IPO investors to ensure stability and commitment after listing. Promoters face a lock-in on their minimum contribution; anchors are locked in for 30 and 90 days; and shares acquired by others in the year before filing are typically locked for six months.
SEBI uses lock-ins to prevent a flood of selling immediately after an IPO. The scheduled expiry of large lock-ins, especially for pre-IPO PE/VC investors, is closely watched as it can add supply and pressure the stock.
Related terms
- Promoter Lock-inPromoter lock-in is the period after an IPO during which promoters cannot sell their shares, ensuring they retain skin in the game.
- Pre-IPO PlacementA pre-IPO placement is a private sale of shares to select investors shortly before a company's public issue, usually at a negotiated price.
- Anchor Lock-inAnchor lock-in is the mandatory holding period during which anchor investors in an IPO cannot sell their allotted shares, designed to protect retail investors from sudden post-listing selling.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.