IPO Lockup Arrangements and Trading by Insiders
58 Pages Posted: 17 Feb 2009 Last revised: 19 Jun 2009
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IPO Lockup Arrangements and Trading by Insiders
Insider Trading Before IPO Lockup Expiry Dates: The UK Evidence
Date Written: February 16, 2009
Abstract
We document that the average lockup of 365 days in the UK is higher than the US 180 days and many insiders trade within the lockup period. We find that prestigious underwriters and underwriter power (longer lockup) drive their trades. However, they sell in over-performing, large, and low institutional holding IPOs, but buy in underperforming IPOs with lower underpricing and proportion of shares locked. On the lockup expiry dates, there is significant price drop for early buy but not for early sell IPOs. We suggest that this early trading activity is pre-arranged with the underwriters to mitigate information asymmetries.
Keywords: Initial public Offering, Lockup, insider trades, information asymmetry, London Stock Exchange.
JEL Classification: G12, G14, G24
Suggested Citation: Suggested Citation
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