Definition
Promoter Lock-in
Promoter lock-in is the period after an IPO during which promoters cannot sell their shares, ensuring they retain skin in the game.
Under SEBI ICDR Regulations, the promoters' minimum contribution (20% of post-issue capital) is locked in for a set period after listing, and any promoter holding above that is locked in for a shorter additional period. The rules were eased in 2021 so that, where issue proceeds are not for capital expenditure, the core lock-in can be 18 months instead of three years.
Lock-in prevents promoters from cashing out immediately and signals their long-term commitment. The scheduled expiry of large promoter lock-ins is closely tracked because it can add selling pressure to the stock.
Related terms
- Minimum Promoter ContributionMinimum promoter contribution is the share of post-IPO capital that promoters must hold and lock in, normally 20%.
- Offer for Sale (OFS)An OFS is the route through which existing shareholders sell their shares to the public — either as part of an IPO or via a separate exchange mechanism — with proceeds going to them rather than the company.
- 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.