Lock-up Period

A period of time when shareholders are not allowed to sell their shares. Company employees who buy shares in an IPO are often required to hold them for a minimum period, sometimes up to 180 days from the start of trading. This is to prevent selling pressure from developing as soon as the shares are launched. Investors in hedge funds are sometimes not allowed to sell their holdings for up to two years. This is because investments made by hedge funds can be so illiquid they might make large losses if they had to sell to pay off investors.