The SEC exemption places some restrictions on the old, private shares. You can’t sell these shares in the open market until you hold them for six months. Before then, you would have to get a new exemption to sell the shares. After the IPO, the shares are no longer private, but they are still restricted. This is because the investment bank managing the IPO insists that existing large shareholders “lock up” their old shares for 180 days following the IPO. This prevents insiders from dumping their shares on the open market and depressing the price of the new shares.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.