IPO Lockup Arrangments and Trading by Insiders
|Speaker:||Meziane Lasfer, Cass Business School|
|Date:||Friday 21 January 2011|
|Location:||MBA Lecture Theatre|
We document insider trading activity within the lockup periods in IPOs with prestigious underwriters and longer lockup lengths. We also find stronger market reaction to insider trading within lockups compared to trading in seasoned firms and other IPOs where insiders do not trade, with more pronounced contrarian behaviour in the pre-trade period, and in the post trade period up to the lockup expiry dates, IPOs with sell trades generate significantly higher returns, while those with buy trades carry on underperforming, suggesting that the sell trades are early releases from lockups in good IPOs, while the buy trades are for price support considerations, but their signal is weak, implying that the valuation uncertainty of IPOs makes the precision of the
information content of insiders’ trading weak and their profitability low.