Venture Capital and Ipo Lockup Expiration: An Empirical Analysis

Bradley, Daniel; Jordan, Bradford D.; Yi, Ha‐Chin; Roten, Ivan C.

doi:10.1111/j.1475-6803.2001.tb00826.x

Cited by 202 publications

(138 citation statements)

References 14 publications

Supporting

Mentioning

122

Contrasting

Unclassified

Order By: Relevance

“…This result is somewhat surprising in the light of the results from other country studies. Bradley et al (2001) find that VC-backed US IPOs are associated with significantly more negative abnormal returns at the lock-in expiry. Similar results are found by Field and Hanka (2001), Brav and Gompers (2003) and Brau et al (2004) for the US; Espenlaub et al (2003) for the UK; Bessler and Kurth (2003) for Germany; and Bertoni et al (2002) for Italy.…”

Section: Resultsmentioning

confidence: 78%

See 1 more Smart Citation

Shareholder Lock-in Contracts: Share Price and Trading Volume Effects at the Lock-in Expiry

2005

View full text Add to dashboard Cite

This paper unveils the diversity in lock-in agreements of firms listed on the Nouveau Marché stock exchange in France. We give the main economic reasons why shareholders adopt lock-in agreements that are more stringent than legally required. We relate the abnormal returns and the abnormal volume at the expiry dates of the different types of lock-in contracts to the degree of underpricing, venture-capitalist reputation and underwriter reputation. Abnormal returns and trading volume increase at the lock-in expiry; this is especially pronounced at the expiry dates of insider lock-in contracts as insiders are legally required to be locked-in. We do not find significant abnormal returns at the expiries of VC contracts, even though trading volume increases at their lock-in expiry. There is also no evidence of a positive (negative) relation between abnormal returns (abnormal volume) and more stringent lock-in contracts. Lock-in contracts and the degree of underpricing are complementary signalling devices.JEL codes: G30, G34, G38

show abstract

Section: Resultsmentioning

confidence: 78%

“…There is very high abnormal trading volume during the first ten days after the lock-in expiry. It is also clear that the increase in trading volume at lock-in expiry is substantially larger for venture-capital backed firms, as documented by Bradley et al (2001) and Field and Hanka (2001).…”

Section: Using Field and Hanka's (2001) Method Average Abnormal Volumentioning

confidence: 91%

Shareholder Lock-in Contracts: Share Price and Trading Volume Effects at the Lock-in Expiry

2005

View full text Add to dashboard Cite

show abstract

“…Ofek Xiong (2006) further shows that an increase in floating assets, such as at the end of an IPO lockup, can cause price depreciation when pessimistic investors are able to sell. IPO evidence (Field and Hanka 2001, Bradley, Jordan, Yi, and Roten 2001, Brav and Gompers 2003 documents an average −1% to −2% cumulative abnormal return and 40% abnormal volume during short windows upon the IPO unlock-up.…”

Section: Events That Change Short-sale Constraintsmentioning

confidence: 99%

“…Previous literature (Field and Hanka 2001, Bradley, Jordan, Yi, and Roten 2001, Brav and Gompers 2003 documents negative abnormal returns and positive abnormal volume associated with IPOs upon the lockup expiration. We add to this research by showing that these negative price reactions are much stronger among firms with high idiosyncratic volatility, where the value-weighted negative price responses are one to three times larger.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Short-sale constraints and the idiosyncratic volatility puzzle: An event study approach

Jiang

Peterson

Doran

2014

Journal of Empirical Finance

View full text Add to dashboard Cite

Using event studies, we show that short-sale constraints play an important role in the negative relation between idiosyncratic volatility and stock returns. We explore three exogenous events that change short-sale constraints: the IPO lockup period expiration, option introduction, and the recent short-selling ban on financial stocks. Following mitigation of short-sale constraints from the first two events, high idiosyncratic volatility stocks underperform low volatility stocks in the short and long run, and are associated with higher abnormal trading volume. Additionally, highly volatile financial firms experience greater price increases upon the short-sale ban enforcement and greater price drops upon the ban expiration.

show abstract

Venture capital exit after venture IPO

Li,

Chi,

Lan

et al. 2024

Strategic Entrepreneurship

View full text Add to dashboard Cite

Research SummaryVenture capital firms (VCs) sometimes continue to hold significant equity stakes in entrepreneurial ventures after venture IPO. The information economics view suggests that retaining equity signals VC commitment and venture quality. This study conceptualizes retaining equity as holding an exchange option, the option to exchange VCs' own valuation of IPO ventures for the market's valuation. Holding this option allows VCs to benefit from the ventures' upside potential. Since exit amounts to giving up the option, the option value represents an opportunity cost of exit. VCs may delay exit if this option is sufficiently valuable. The study examines two key conditions that interact to increase the value of this option: uncertainty and positive private information. This study contributes to research on VC exit and real options.Managerial SummaryWhen do VCs retain equity rather than exit after venture IPO? Researchers have addressed the impact of signaling, cash constraints, human capital constraints, blockholding, VC fund performance, portfolio diversification and institutional features. We identify a previously unrecognized driver: to retain the opportunity to benefit from an IPO venture's upside potential that is yet to be fully recognized or realized. We submit that VCs' incentive to retain equity increases with uncertainty in the venture's industry, and VCs' positive private information as indicated by venture patent applications and positive market surprises in the venture's industry. We find largely supportive evidence for the positive joint effect of uncertainty and private information on the decision to retain equity within the first year or even two years after IPO lockup expiration.

show abstract

Venture Capital and Ipo Lockup Expiration: An Empirical Analysis

Cited by 202 publications

References 14 publications

Shareholder Lock-in Contracts: Share Price and Trading Volume Effects at the Lock-in Expiry

Shareholder Lock-in Contracts: Share Price and Trading Volume Effects at the Lock-in Expiry

Short-sale constraints and the idiosyncratic volatility puzzle: An event study approach

Venture capital exit after venture IPO

Contact Info

Product

Resources

About