A lockup expiration is the rare financial event that arrives with six months of written notice and still catches people unprepared. The date is in the prospectus. Everyone at the company knows it. And yet the week before expiration is when my phone rings, usually with a version of the question "so what do I actually do?"
The honest answer is that by then, half the good options are gone. This note is the version of the conversation I wish happened at day one instead. It is organized as a calendar, because the lockup is fundamentally a calendar problem, and calendars reward people who read them early.
A lockup is not a law. It is a contract between insiders and the underwriters, typically barring sales for 180 days after the IPO, so that early holders do not flood a newly public market. Because it is a contract, the terms vary, and yours are the only ones that matter. Recent IPOs increasingly include early-release provisions: a portion of shares freed after the first earnings report, or if the stock trades some percentage above the IPO price for a stretch of days. Some releases come in staggered tranches.
So step one is unglamorous: find the "Shares Eligible for Future Sale" section of the prospectus and read what you actually signed up for. I have met exactly one employee who did this without being told. Be the second.
Less than you fear, on average. The best-known academic study of lockup expirations found abnormal returns of roughly negative one and a half percent around the event, which is real but modest, and consistent with a market that can read a calendar too.1 The supply everyone worries about is mostly priced in before it arrives.
But you do not get to experience the average. You experience your company, and the dispersion around that average is wide. Thinly traded names with large insider ownership can move a lot more. Biotech adds event risk of its own: a clinical readout or an FDA date does not check the lockup calendar. My position is simple and I will state it plainly: I do not try to time the expiration, and I do not think you should either. The job of a good plan is to make the date boring.
Days 1 through 30 after the IPO. Read your lockup terms, as above. Then inventory every share you hold, by type and by tax lot: RSUs, ISOs, NSOs, founder or early-exercise shares. They are taxed differently and they deserve different treatment later.
While you are at it, check the withholding on any RSUs that vested at the IPO. Double-trigger RSUs typically vest in bulk the moment the company goes public, and employers withhold federal tax at the supplemental rate of 22 percent. If your actual marginal rate is 35 or 37 percent, the difference is a tax bill waiting for April. On a large vest this runs into six figures. Set the money aside now and look into estimated payments. This is the single most common unpleasant surprise I see, and it has nothing to do with the stock going up or down.
If you hold founder shares or early-exercised options, this is also the moment to check your QSBS status, because the holding-period clock and the paperwork both predate the IPO. That subject gets its own note.
Roughly 120 to 90 days before expiration. Decide your target. Not "how much should I sell," which invites procrastination, but a sharper question: if you had this position's value in cash today, how much of it would you spend buying this one stock? For most people the honest answer is a fraction of what they hold. The gap between that answer and your current position is the amount under discussion. Then have the after-tax math built lot by lot, because the order in which you sell lots changes the bill.
Around 90 days out: the 10b5-1 window. A Rule 10b5-1 plan is a pre-committed trading schedule you adopt while you have no material nonpublic information, which then executes automatically whether or not you later come into possession of some. Since the SEC's 2022 amendments, officers and directors face a cooling-off period before the first trade: the later of 90 days after adoption or two business days after the next 10-Q or 10-K, capped at 120 days. Everyone else waits 30 days. Overlapping plans are generally prohibited, and you get one single-trade plan per twelve months.2
Here is why the plan matters more than people expect. Lockup expirations have a habit of landing inside a quarterly trading blackout, which means you can be free to sell by contract and frozen by company policy in the same week. A plan adopted in an open window about 90 days ahead executes through the blackout automatically. The 10b5-1 exists so your calendar cannot take you hostage.
30 days out: logistics. Confirm where your shares physically live. Shares sitting at the company's transfer agent cannot be sold from there; moving them to a brokerage takes days, sometimes longer, and the week of expiration is a bad time to discover this. If you are an affiliate, Rule 144 adds paperwork and volume limits: sales in any three-month window are capped at the greater of one percent of shares outstanding or the average weekly trading volume, with a Form 144 filing.3 Your broker has done this before. Give them the month of runway they need.
Day zero and after. If a plan is running, do nothing; that was the point. If you are selling manually, tranche the sales, use limit orders, and respect the day's liquidity rather than testing it at 9:31 in the morning. Volume around expirations spikes and then normalizes. There is no prize for finishing first.
The framework I use is minimum regret. Imagine two futures: the stock triples from here, or it falls 70 percent. Both happen routinely to newly public companies, and in biotech both can happen inside a year. Pick the amount of selling that makes each future survivable. Sold too much and it triples? You are still rich, just slightly annoyed. Sold too little and it craters? That one can change what your life looks like. The asymmetry usually argues for selling more than feels loyal.
A number worth sitting with: individual biotech stocks routinely carry annualized volatility of 60 to 90 percent, and a single trial readout can move a name 40 percent overnight in either direction. Whatever fraction of your net worth rides on that distribution should be a decision, not a leftover.
In sixteen years I have not once heard someone say they regret diversifying at their lockup. I have heard the other regret many times.
If your lockup date is already on a calendar somewhere, the useful conversation is the one that happens now, not the week before. The introductory call is 30 minutes, requires no preparation, and nothing is pitched.
1Field, L. and G. Hanka (2001). "The Expiration of IPO Share Lockups." The Journal of Finance, 56(2).
2Exchange Act Rule 10b5-1, as amended by the SEC in December 2022, effective 2023. Plan mechanics and cooling-off periods described here are general; your company's insider trading policy adds its own layer.
3Securities Act Rule 144.
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