IPO Lockup Arrangements and Trading by Insiders

58 Pages Posted: 17 Feb 2009 Last revised: 19 Jun 2009

See all articles by Hafiz Hoque

Hafiz Hoque

Swansea University ; City University London - Sir John Cass Business School

Meziane Lasfer

Bayes Business School, City, University of London

Multiple version iconThere are 2 versions of this paper

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

Hoque, Hafiz and Lasfer, Meziane, IPO Lockup Arrangements and Trading by Insiders (February 16, 2009). EFA 2009 Bergen Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1344748 or http://dx.doi.org/10.2139/ssrn.1344748

Hafiz Hoque

Swansea University ( email )

Singleton Park
Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44(0)7515890949 (Phone)
+44(0)2070408546 (Fax)

Meziane Lasfer (Contact Author)

Bayes Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
Great Britain
+44 20 7040 8634 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://https://www.bayes.city.ac.uk/faculties-and-research/experts/meziane-lasfer

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