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Lockup clauses in Italian IPOs

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  • Dmitri Boreiko
  • Stefano Lombardo

Abstract

Virtually all Initial Public Offering (IPO) prospectuses feature lockup provisions that limit pre-IPO shareholders’ share sale for some period of time after negotiations start. The aim of this article is to analyse voluntary lockups in Italy. We show that lockups are considerably longer and heterogeneous compared to the US or European evidences, and their duration and size serve primarily as a commitment device to alleviate the moral hazard problem faced by incumbent shareholders. We document considerable differences in lockup clauses among main shareholder classes, with venture capitalists and outside investors having considerably lower percentages of owned shares restricted for sale and with significantly shorter lockup durations. We also show that abnormal returns around the lockup expiration dates are associated solely with Venture-Capital (VC)-backed IPOs.

Suggested Citation

  • Dmitri Boreiko & Stefano Lombardo, 2013. "Lockup clauses in Italian IPOs," Applied Financial Economics, Taylor & Francis Journals, vol. 23(3), pages 221-232, February.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:3:p:221-232
    DOI: 10.1080/09603107.2012.714067
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Zubair Mumtaz & Zachary Alexander Smith, 2021. "Analyzing the duration of IPOs from offering to listing using the Cox proportional hazards model," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(1), pages 5-43, January.
    2. Shamsul Bahrain Mohamed-Arshad & Kamarun Nisham Taufil-Mohd & Nurwati Ashikkin Ahmad-Zaluki, 2016. "Share Price and Trading Volume Reactions to Lockup Expiration in Malaysian IPOs," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 958-962.
    3. Lokman Tutuncu, 2020. "Lock-up provisions and valuation of Turkish IPOs," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 587-608, December.
    4. Sahil Narang & Rudra P. Pradhan, 2021. "IPO lock-up: a review and assessment," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(3), pages 343-369, September.
    5. Ping Zhang, 2009. "Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions," Discussion Papers 2009-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    6. Dmitri Boreiko & Dimche Risteski, 2021. "Serial and large investors in initial coin offerings," Small Business Economics, Springer, vol. 57(2), pages 1053-1071, August.
    7. Ping Zhang, 2009. "Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions," Discussion Papers 2009-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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