What an IPO Lockup Is and How to Find When It Ends
The lockup decides when pre-IPO shareholders, including employees with RSUs, can first sell. Here is where the terms are written and how they are usually structured.
An IPO lockup is an agreement in which a company’s insiders and existing shareholders promise the underwriters not to sell their shares for a set period after the IPO, typically 180 days. The exact length, who is covered and any early-release triggers are written in the prospectus, in the sections titled “Shares Eligible for Future Sale” and “Underwriting.”
Lockups are contracts with the underwriters, not an SEC rule, so terms differ from deal to deal. The SEC’s investor bulletin Investing in an IPO describes the 180-day period as typical and calls the shares that cannot yet trade the “market overhang”; when lockups expire, the bulletin says, the share price may decline.
Who is covered by an IPO lockup?
Lockups usually cover directors, executive officers, large investors such as venture funds, and any holders selling shares in the IPO. Many employees are covered too, either by signing the lockup or through “market standoff” clauses in their equity plan and stock agreements.
Figma’s 2025 IPO prospectus gives a concrete picture. According to its final prospectus dated July 30, 2025, directors, executive officers, the selling stockholders and other holders together owning about 74% of the company’s outstanding Class A common stock and convertible securities signed lockup agreements with the underwriters. Another roughly 9% were bound by market standoff provisions in an investors’ rights agreement.
| Holder | Usually locked up? | Where the restriction comes from |
|---|---|---|
| Directors and executive officers | Yes | Lockup agreement with underwriters |
| Venture and private equity investors | Yes | Lockup agreement or investors’ rights agreement |
| Employees with shares, options or RSUs | Usually | Market standoff clause in the equity plan or award agreement |
| Investors who bought in the IPO | No | Free to sell once trading starts |
How long does an IPO lockup last?
The most common length is 180 days after the date of the final prospectus, but some lockups are shorter, and some end earlier if certain events happen. The only reliable answer for a specific company is the language in its prospectus.
Figma’s lockup shows a modern structure. It ended on the earlier of two dates:
- the start of trading on the second trading day after Figma publicly announced earnings for the second quarter following the latest period in the prospectus, or
- 180 days after the date of the prospectus.
Earnings-based endings like this tie the release to a time when the company has published fresh financial results, so the date depends on the company’s reporting calendar.
How do I find the exact lockup terms?
The terms are in the IPO prospectus on SEC EDGAR. You can find them in a few minutes:
- Search the company on EDGAR and open the 424B4 (or 424B3) final prospectus filed right after pricing. If there is none yet, use the latest S-1/A.
- Note the prospectus date on the cover. Day counts usually run from that date.
- Search the document for “lock-up.” The summary is in “Shares Eligible for Future Sale”; the full terms are in “Underwriting.”
- Read the exceptions: transfers to family trusts, sales under existing 10b5-1 plans, shares withheld for taxes on RSUs, and staged early releases.
- Check who can waive the lockup. In Figma’s case, it was Morgan Stanley and Goldman Sachs on behalf of the underwriters.
- Look for later 8-Ks or press releases announcing any early release.
What can end a lockup early?
Lockups end early only through triggers written in the agreement or a waiver granted by the lead underwriters. Common designs include:
- Earnings-based release: the lockup ends a set number of trading days after a specified earnings announcement, as in Figma’s case.
- Price-based release: a portion of shares is released if the stock closes above a set percentage of the IPO price for a set number of days.
- Staged release: a percentage of shares, often for employees, is released on an earlier date and the rest later.
- Underwriter waiver: the lead banks consent to a specific sale or a broad early release, which is usually announced.
The prospectus states which of these apply. If none is described, assume the full period runs.
What does lockup expiration mean for employees?
When the lockup ends, employees who hold vested shares are allowed by the lockup to sell, but other limits still apply. The company’s insider trading policy usually allows employee trades only during open trading windows, and officers and directors who are “affiliates” must also follow SEC Rule 144.
RSUs often settle at or soon after the IPO, with some shares withheld to cover taxes. The remaining shares sit in your brokerage account but cannot be sold until the lockup ends. That means the tax on RSU income is based on the share price at settlement, while the first chance to sell comes months later at whatever the price is then. For how RSU withholding works, see our guide to RSUs in an acquisition, which covers the same tax rules. How to handle this for your own situation is a question for a tax professional or financial adviser.
Bottom line
Put the lockup end date on your calendar from the prospectus, then check the company’s insider trading policy for the next open trading window, because the two dates rarely line up. If your lockup has an earnings-based trigger, the company’s announced earnings date tells you when it ends. See how an IPO works for the earlier steps.
FAQ
Is an IPO lockup required by law?
No. It is a contract between the shareholders and the underwriters. Securities law separately limits sales by affiliates under Rule 144, but the lockup itself is negotiated for each IPO.
Do direct listings have lockups?
A direct listing has no traditional underwritten offering, so lockup terms work differently and vary by company. Our comparison of direct listings vs IPOs explains the differences.
Can I sell my shares if I leave the company during the lockup?
Leaving the company does not usually end the lockup or market standoff. The restriction is tied to the shares, so it continues until the stated end date.
What happens to the stock price when a lockup expires?
No one can say in advance. More shares become eligible to sell, and the SEC bulletin notes the price may decline, but whether holders sell and how the market responds differs from company to company.
