What Is an IPO Lockup, and Why Can a Stock Drop When It Ends?
Starship and Super Heavy booster (illustration). Image: SpaceX
When a company goes public, most of its shares are still owned by insiders: founders, employees and early investors. A lockup is an agreement that stops them selling for a set period after the IPO, usually 90 to 180 days. When it ends, a lot of new shares can hit the market at once, and that extra supply can push the price down.
Checked October 6, 2026. Lockup dates come from each company's IPO prospectus; check the filing before relying on any date.
Why lockups exist
- They keep the early market orderly. Without one, insiders could sell heavily on day one, swamping the small number of shares that were sold to the public.
- Underwriters require them. The banks running the IPO want buyers to know insiders aren't about to dump their stock.
- They're a contract, not a law. The terms are set out in the IPO prospectus, and the underwriters can sometimes agree to release shares early.
What happens when a lockup ends
The number of shares that can trade (the float) can jump overnight. If many insiders sell, the price can fall. But it isn't automatic:
- Prices often drift down in the weeks before an expiry, as traders position for it.
- Many insiders keep their shares, especially if they believe in the company or face tax costs on selling.
- A well-known expiry date is usually partly priced in already.
SpaceX: a staggered lockup
SpaceX, which listed on June 12, 2026, didn't use a single expiry date. Its lockup releases shares in stages:
| When | What unlocks |
| August 6, 2026 | The first and largest tranche, about 911.5 million shares, two trading days after its first earnings report |
| From late August to late October | Smaller tranches of about 7% each, at roughly 70, 90, 105, 120 and 135 days after the IPO |
| After third-quarter results, expected late October | A larger earnings-linked tranche |
| About December 8–9, 2026 | The standard 180-day lockup ends for the remaining employee and early-investor shares |
| About June 12, 2027 | Elon Musk's shares, locked for 366 days with no early release |
The first unlock in August more than doubled SpaceX's public float. The stock bottomed in early August and has since recovered, closing at $171.09 on October 5, 2026, which shows an expiry doesn't decide the long-term price on its own.
What it means for you
- Know the dates for any recent IPO you own or are thinking of buying. They're in the prospectus and widely reported.
- Expect volatility around each one, not a guaranteed drop.
- Don't try to time it with money you'll need soon. If you're buying for the long term, splitting purchases over several months (see dollar-cost averaging) takes the timing pressure off.
- Shares you buy on the open market after an IPO are never locked up. The lockup only applies to pre-IPO holders.
For the full picture, read how to buy IPO stock and how to buy SpaceX stock.
FAQ
How long is a typical IPO lockup? Usually 180 days, though some are 90 days, and some companies stagger releases or lock founders up for longer, as SpaceX did.
Does a stock always fall when the lockup expires? No. It often dips around the date, but the effect varies, and much of it can happen in the run-up.
Can I sell shares I bought after the IPO? Yes, anytime. Lockups only restrict insiders and investors who held shares before the company went public.
Where do I find a company's lockup terms? In the "Shares eligible for future sale" and "Underwriting" sections of its IPO prospectus, filed with the SEC and searchable on EDGAR.
Figures and rules in this article are checked against the official sources below. Where they disagree with us, they win.
