ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos


Investing Videos 424 videos

Finance: What is Devaluation?
1 Views

What is Devaluation? The process by which a nation deliberately lowers the value of its currency relative to other international currencies is call...

Finance: What is the Advance Decline Ratio?
14 Views

What is the Advance Decline Ratio? The advance decline ratio is used to determine how the market performed on a given day. It does this by comparin...

Finance: What is speculation?
6 Views

What is speculation? Speculation refers to a high risk, high reward scenario in investing. When an investor engages in a speculation, they take on...

See All

Finance: What is a Lock Up Agreement? 3 Views


Share It!


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.

Language:
English Language

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

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

Related Videos

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Fake News
11938 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...