Understanding IPO "Lock-in" Periods and Why They Matter
IP
IPO List Editorial • 1 min Read
One of the most critical but often ignored factors in an IPO’s performance is the "Lock-in Period." This is a mandated period during which promoters, anchor investors, and early-stage VC firms cannot sell their shares. Typically, anchor investors have a 30-day and 90-day lock-in, while promoters are locked in for 18 months to 3 years.\n\nWhy does this matter to you? When the lock-in period ends, a massive supply of shares can suddenly hit the market. If early investors decide to book profits, it can lead to a sharp decline in the stock price. We saw this clearly with several 2024 listings where the 90-day mark triggered a 10-15% crash in prices.\n\nHowever, a lack of selling at the end of a lock-in period is an incredibly bullish sign. It shows that the largest shareholders believe the company still has significant upside. For example, if a major VC firm chooses to hold its stake in a fintech company past the 1-year mark, it signals to the retail market that the "smart money" is staying put.\n\nInvestors should always check the "Capital Structure" section of the prospectus to see the exact dates when these lock-ins expire. There are several online calendars that track "Lock-in Expiry" for all major NSE and BSE listings. Marking these dates on your calendar can help you avoid buying into a peak just before a supply dump.\n\nIn conclusion, understanding lock-in dynamics is part of advanced IPO investing. It allows you to anticipate market moves rather than just reacting to them. As we head into a busy 2026, keep a close eye on the lock-in status of heavyweights like Hyundai and Swiggy, as their expiry dates will be major market-moving events.
