lock up period
Lock Up Period is the stretch of time after a company lists or raises money when insiders and early investors are barred from selling their shares.
In plain English
So your startup just got that investor cheque of ₦150,000,000, or your company just listed on the Nigerian Exchange, and you are wondering, can I now sell my shares and finally build that house in Lekki? Not yet, and there is a good reason for the wait.
A lock up period is the agreed stretch of time, often ranging from three months to two years, during which founders, early staff and early investors cannot sell their shares. It exists so that the people closest to the company cannot dump their stock the moment there is a buyer, leaving new investors holding shares that have crashed in value because everyone with inside knowledge rushed for the exit.
Think about a Nigerian fintech that lists on the NGX. If the founders and their early backers could sell everything on day one, the market would read that as a lack of confidence in the company they built, and the share price would fall fast. The lock up gives the public market time to trust the numbers before insiders can cash out.
This shows up in the diaspora world too. A Nigerian in London who invests early in a friend's startup back home through a SAFE or convertible note will often find a lock up clause in the agreement, tying their money down until an agreed date or event, such as a proper funding round or an exit.
It is not a punishment. It is a signal. When founders willingly lock up their own shares, they are telling everyone else, I believe in this enough to wait with you.
A founder holds shares worth ₦80,000,000 on paper after her company lists. The lock up period is 12 months, so even though the share price rises to ₦95,000,000 worth in month six, she cannot sell a single unit until the year is up.
Questions people ask
Can a founder sell any shares at all during lock up?
Usually no, though some agreements allow a small percentage to be sold for personal needs, or permit transfers to family trusts. The exact terms depend on what was signed with investors or the exchange.
What happens the day the lock up period ends?
Shares often become available for sale all at once, which can increase supply and sometimes push the price down temporarily as insiders who need cash sell. Smart investors watch these dates closely.
Is a lock up period the same as vesting?
No. Vesting decides when you earn ownership of shares over time as you keep working for the company. Lock up decides when shares you already own can be sold. A founder can be fully vested and still be locked up.
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