What does it means that a stock has a lockup expiration?


I’m reading about the Palantir lockup expiration but I don’t understand whether is a good thing for those who bought it or a good thing for the company.

In: Economics

A lockup means certain people, usually early investors can’t sell their stock for a while. This is common practice to stop early investor from selling too much stock after a company first joins the stock market.

The expiration just means it’s ending so they will be. Able to sell their stock as they please.

Usually its not a huge deal but if anything it may cause the stock to go down a bit if a lot of people are selling.

When a company goes public, people close to the company can’t all just dump their stock the second it’s traded on a public stock exchange. This could flood the market with shares, cause shares to fall in price, and cause the market to lose confidence in the company. So founders, employees with shares, etc. often have a period of time after the IPO in which they cannot sell their shares. But eventually the lockup does expire, and those employees can sell. And many do… if you’re a programmer with a $100k salary and $1m in shares, you’ve got some plans for that wealth now that you can access it, whether that’s buying a Porsche, a down payment on a house, or just diversifying your investment portfolio. Whenever the lockup does expire, there is typically a bit of a flood of shares on the market and prices may dip, but it has less effect than if it were immediately after the IPO.