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Finance: What is a Lock Up Agreement? 3 Views
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Description:
What's a lock-up agreement? We think it has something to do with a shiv, but let's watch this video, just in case.
- Social Studies / Finance
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Econ
- Terms and Concepts / Investing
- Terms and Concepts / IPO
- Terms and Concepts / Stocks
- Terms and Concepts / Tax
- Terms and Concepts / Trading
Transcript
- 00:00
Finance allah shmoop what is ah lock up agreement Okay
- 00:07
You invested your dough in the original round of this
- 00:11
venture capital like investment or you're a founder whose entire
- 00:15
network lives in the form of stock in your hot
- 00:18
little new company Dot com you sold a portion of
Full Transcript
- 00:21
it to the public earlier in your aipo raising a
- 00:25
big fat pot of money for you to go spend
- 00:28
opening new sales channels in china Uzbekistanian and somalia Yeah
- 00:32
good luck with that So now you're desperate to sell
- 00:35
some percentage of your holdings You've been dying to buy
- 00:38
that new tesla suv with the gullwing doors and you
- 00:41
know self make upping feature But you can't buy it
- 00:44
Why Well because your locked up and it's nothing prunes
- 00:49
will solve You signed a contractual agreement when you did
- 00:52
the original handshake with the investment bankers who were taking
- 00:56
you public You agreed that you would follow what are
- 00:59
called the one forty four a laws which restrict insiders
- 01:03
from selling any shares until to quarters and change have
- 01:07
fast during which a company is newly public Well why
- 01:11
do these laws even exist Well because a bunch of
- 01:13
scummy city slickers screwed over a bunch of uneducated farmers
- 01:17
in a bygone era such that the government had to
- 01:20
step in and make everyone play fair and square like
- 01:24
they dumped their shares the minute the company was public
- 01:27
on unsuspecting farmers who paid eighty seven dollars share only
- 01:30
to watch the stock trade down to eighty seven cents
- 01:32
a share two years later or even less Yeah that
- 01:35
happened right Well the general idea here is that if
- 01:38
a company can show professionally audited public Numbers 4:6 months
- 01:43
and change of being a public company well then they
- 01:45
wouldn't have been able to hide something deep dark fraud
- 01:49
like elements about their business that it was all kind
- 01:52
of a shell game against those poor farmers Well everyone
- 01:55
would be playing then on the same level playing field
- 01:58
and it would be fair upon public notice for insiders
- 02:02
to sell some limited percentage of their total holdings and
- 02:06
get liquid well in practice all kinds of restrictions exist
- 02:10
against freeform insider selling so a maximum total percentage owned
- 02:15
per month recorder per year is out there their maximum
- 02:18
ceilings against which total volume can't be certain passed in
- 02:23
a given day like if a million shares trade in
- 02:25
a day you can't sell more than five percent or
- 02:28
fifty thousand shares in a day And a bunch of
- 02:30
other restrictions exist that are designed to mitigate the spread
- 02:34
between information held by insiders and information held by outsiders 00:02:40.645 --> [endTime] Yeah other outsiders
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