Lockup Clauses in Italian IPOs

Virtually all IPO prospectuses feature lockup provisions that limit pre-IPO shareholders’ share sales for some period of time after negotiations start. The aim of the paper is to analyze in-depth voluntary lockups in the Italian setting and to draw conclusions about their effect both on different shareholder classes and on share prices. We show that the lockups are considerably longer and heterogeneous than US or European evidence shows, and their duration and size serves primarily as a commitment device to alleviate the moral hazard problem faced by the incumbent shareholders. We show that abnormal returns around the lockup expiration dates are associated solely with venture-capital backed IPOs.