How to understand an IPO lock-up period?

Lock-up period

The lock-up period refers to the shares held by the non-circulating shareholders of the listed company may not be sold in the secondary market for a certain period of time in the IPO.

The purpose of this limitation is to avoid the downward pressure on the market caused by the instantaneous expansion of non-tradable stocks when the concentration of non-tradable shares is concentrated.

Specifically:

1. The period within which an employee of a company shall not transfer restricted shares through the secondary market or other means after the acquisition of restricted shares, and the lock-up period on restricted shares shall not be less than one year from the date of award.
2. A measure to prevent false listing. It is difficult for enterprises to continue to falsify because it is too costly.
3. To prevent executives or institutions from cashing out at the beginning of trading, seriously affecting the stock price.