The 180-Day Window You Can't Control

The finish line that isn't

After years of building equity in a private company, the IPO feels like the finish line. The stock is finally public. There is a price. The position is "liquid."

Except it isn't - not for you.

For 90 to 180 days after the IPO, insiders are prohibited from selling. This is the lockup period: a contractual restriction between the company, its underwriters, and its shareholders that prevents founders, employees, and early investors from selling their shares immediately after the public offering.

The lockup exists to protect the market. Without it, a flood of insider selling on day one could overwhelm demand and crash the stock price. The restriction signals to public investors that insiders are committed, that they believe in the company's long-term value, and that they are not simply looking to exit at the first opportunity.

This is sensible from a market structure perspective. But from the perspective of someone who has spent years accumulating equity and finally sees a path to liquidity, the lockup creates a different kind of problem: you are fully exposed to a price you cannot act on.

The exposure you cannot hedge

During the lockup period, your equity position is marked to market in real time. You can watch your net worth fluctuate daily. You can see the stock rise or fall. You know exactly what your shares are worth at any moment.

But you cannot do anything about it.

You cannot sell. You cannot hedge. In most cases, you cannot even pledge the shares as collateral for a loan, because the shares remain subject to contractual restrictions that make them unacceptable to most lenders.

This creates a peculiar form of risk: you have all the downside exposure of a public equity position with none of the liquidity that normally accompanies it. You are long a volatile asset with no ability to reduce, hedge, or monetize the position.

For 180 days, you simply wait.

What happens at expiration

The academic research on lockup expirations is consistent: stock prices tend to decline around the expiration date, and the effect is statistically significant.

A landmark study of over 2,500 IPOs from 1988 to 1997 found that lockup expirations are associated with negative abnormal returns, with the effect concentrated in venture-capital-backed firms. For high-tech companies with the greatest post-IPO price increases, the declines were most pronounced.

The mechanism is straightforward. When the lockup expires, a large volume of previously restricted shares becomes available for sale. In some cases, the newly tradeable shares represent multiples of the existing public float. This supply shock - or even the anticipation of it - creates downward pressure on the price.

Uber's 2019 lockup expiration is a well-documented example. The company went public in May at $45 per share. By the time the 180-day lockup expired in November, the stock had already declined substantially. On the expiration date, approximately 763 million additional shares became eligible for trading - roughly four times the previously available float. The stock hit an all-time low of $25.58, down 43% from the IPO price. Trading volume spiked to fifteen times the daily average.

Similar patterns have played out across the technology sector. Beyond Meat traded at $105 before its lockup expiration and $80 after. Lyft declined following its August 2019 expiration. The anticipation of these events often begins weeks before the actual date, as sophisticated investors position for the expected supply increase.

The timing you do not choose

The lockup expiration date is set at the IPO. You do not negotiate it. You do not control it. It arrives when it arrives, regardless of what the market is doing, what the company's earnings look like, or what your personal financial situation requires.

If the stock has risen substantially since the IPO, you may face a large taxable gain the moment you sell - and you may be selling into a declining market as other insiders do the same.

If the stock has fallen, you may be selling at a loss, or holding in hopes of a recovery that may not come.

If you need liquidity for a specific purpose - a home purchase, a tax payment, an investment opportunity - you may find that the lockup expiration does not align with your timeline.

The 180-day window is not designed around your needs. It is designed around the market's needs. You are a passenger.

The compounding problem

The lockup period does not exist in isolation. It intersects with several other constraints that compound the exposure.

Blackout periods. Many companies prohibit insider trading during the weeks surrounding earnings announcements. If the lockup expiration falls during or near a blackout period, the effective restriction may extend beyond the stated 180 days. Some lockup agreements explicitly address this, providing that if the expiration would fall during a blackout, the restriction continues until the blackout ends.

Staggered releases. Some modern IPOs use staggered lockup structures, releasing different percentages of shares at different times based on dates, earnings releases, or stock price thresholds. This can create uncertainty about when you will actually be able to sell - and how much. The terms are often buried in complex legal language and may depend on conditions that are not yet determined at the time of the IPO.

10b5-1 plans. Insiders who wish to sell after the lockup typically need to establish a 10b5-1 trading plan, which requires advance planning and creates its own constraints. You cannot simply decide to sell on the day the lockup expires; you need to have planned the sale weeks or months in advance.

Tax timing. The timing of your sale determines the tax year in which you recognize the gain. If the lockup expires in November, selling in December puts the tax liability in the current year. Waiting until January defers it to the following year. But you may not have the flexibility to wait if you need liquidity or if the stock is falling.

The window before the window

Here is the less obvious problem: the lockup period is the final constraint, but it is not the only one.

Before the IPO, while the company is still private, there is often a "quiet period" during which employees are restricted from selling shares in secondary transactions. This can begin months before the expected IPO date.

The quiet period is designed to prevent insider selling that could complicate the IPO process or create legal issues around the offering. But from the shareholder's perspective, it means that the period of illiquidity begins well before the IPO itself.

A typical timeline might look like this: you learn that the company is preparing to go public. Six months before the IPO, secondary transactions are frozen. The IPO occurs. The lockup runs for another 180 days. The total period of restricted liquidity is nine months to a year - or longer if the IPO is delayed.

During this entire period, your equity position is growing or shrinking based on market forces you cannot respond to. You are accumulating unrealized gains or losses that you cannot crystallize. You are watching a number on a screen that you cannot turn into cash.

What this means for concentration

The lockup period is a concentration problem in its purest form.

You hold a large position in a single asset. The asset is volatile. You cannot diversify. You cannot hedge. You cannot sell.

For 180 days, you are making an involuntary, undiversified bet on a single stock - often at a time when the stock is most volatile, when public market investors are still discovering the company, and when the price is most susceptible to swings based on earnings, analyst coverage, and broader market conditions.

If the stock rises, you capture the gain - but you cannot lock it in.

If the stock falls, you absorb the loss - and you cannot stop it.

The concentrated exposure that existed in the private market continues into the public market, but now with daily price visibility and no ability to act.

The alternatives that exist before the window closes

There is a period before the quiet period begins - before the IPO process freezes liquidity - when shareholders still have options.

During this window, some shareholders access liquidity through secondary sales. Others do not sell but instead use their private holdings as collateral for credit facilities, accessing capital without triggering a taxable event.

The distinction matters. A secondary sale is a realization event. It triggers taxes, forfeits future upside on the sold shares, and may affect QSBS eligibility. A credit facility structured as a loan is not a sale. It does not trigger taxes. It preserves the full position. And it can be structured as non-recourse, meaning the borrower's exposure is limited to the pledged shares.

The key is timing. Once the quiet period begins, the window closes. Once the IPO occurs, the lockup begins. Once the lockup expires, you are selling into the same market as every other insider, often at depressed prices.

The shareholders who maintain optionality through the IPO process are typically those who addressed their liquidity needs before the process began - not those who waited for the "finish line" that turned out to be a starting gate.

The framework

The lockup period is not an abstract risk. It is a specific, predictable constraint with well-documented consequences.

If you hold meaningful equity in a company that may go public, the framework is straightforward:

First, understand the timeline. When does the quiet period likely begin? When is the IPO expected? How long will the lockup last? What are the blackout periods? Map the full duration of restricted liquidity, not just the 180 days after the IPO.

Second, assess your exposure. What percentage of your net worth is concentrated in this position? What happens to your financial situation if the stock declines 30%, 50%, or more during the lockup - and you cannot sell?

Third, consider your options before they disappear. If you need liquidity, or want to reduce concentration, or have specific financial obligations, the time to address them is before the quiet period begins. Waiting until after the IPO means waiting until after the lockup - and selling into the same supply glut as everyone else.

Fourth, distinguish between liquidity events and liquidity. The IPO is a liquidity event for the company. It is not immediate liquidity for you. The lockup converts paper wealth into real wealth only after 180 days of fully exposed, completely illiquid waiting.

The window you can control

You cannot control the lockup period. You cannot control when the IPO occurs, what the stock does afterward, or when you will finally be able to sell.

But you can control what you do before the window closes.

The shareholders who navigate IPOs successfully are not the ones who wait passively for the "liquidity event" and hope the stock cooperates. They are the ones who recognize that the 180 days after the IPO are a period of maximum exposure with minimum control - and who structure their positions accordingly, before the constraints take effect.

The lockup is not a finish line. It is a holding period. And the terms of how you hold - with what exposure, what optionality, what resources - are set before it begins.

Bedrock Bridge Capital provides tax-efficient credit facilities for concentrated private positions. This material is for informational purposes only and does not constitute tax, legal, or investment advice. Consult your advisors regarding your specific situation.