Comments on: What is a market standoff or IPO lockup provision? http://www.startupcompanylawyer.com/2007/08/25/what-is-a-market-standoff-or-ipo-lockup-provision/ Venture capital, seed financings, convertible note bridge debt, M&A, option vesting and other matters explained for founders and entrepreneurs Mon, 15 Mar 2010 21:53:47 +0000 http://wordpress.org/?v=2.9 hourly 1 By: Yokum http://www.startupcompanylawyer.com/2007/08/25/what-is-a-market-standoff-or-ipo-lockup-provision/comment-page-1/#comment-576 Yokum Sat, 29 Mar 2008 01:50:30 +0000 http://www.startupcompanylawyer.com/2007/08/25/what-is-a-market-standoff-or-ipo-lockup-provision/#comment-576 As a practical matter, there is probably very little that the company or the underwriters can do to force a shareholder to sign a market standoff agreement if it wasn't contained in the original stock purchase or other agreement. If a significant amount of shares aren't locked up, the underwriters may tell the company that they will have difficulty marketing the IPO. In that case, the company may consider taking more drastic measures, such as a merger into a new company, in order to force a lockup upon all shareholders. All shareholders typically sign a market standoff with the same terms. The company and the underwriters are unlikely to negotiate with a minor shareholder. If the shareholder does not sign, the company may make it more difficult for the shareholder to sell the shares post-IPO, such as demanding a legal opinion to allow a transfer. Most competent counsel will include market standoff provisions in all stock issuance documents to avoid this problem in the future. As a practical matter, there is probably very little that the company or the underwriters can do to force a shareholder to sign a market standoff agreement if it wasn’t contained in the original stock purchase or other agreement. If a significant amount of shares aren’t locked up, the underwriters may tell the company that they will have difficulty marketing the IPO. In that case, the company may consider taking more drastic measures, such as a merger into a new company, in order to force a lockup upon all shareholders.

All shareholders typically sign a market standoff with the same terms. The company and the underwriters are unlikely to negotiate with a minor shareholder. If the shareholder does not sign, the company may make it more difficult for the shareholder to sell the shares post-IPO, such as demanding a legal opinion to allow a transfer.

Most competent counsel will include market standoff provisions in all stock issuance documents to avoid this problem in the future.

]]> By: vern http://www.startupcompanylawyer.com/2007/08/25/what-is-a-market-standoff-or-ipo-lockup-provision/comment-page-1/#comment-575 vern Fri, 28 Mar 2008 21:03:17 +0000 http://www.startupcompanylawyer.com/2007/08/25/what-is-a-market-standoff-or-ipo-lockup-provision/#comment-575 Hello, I purchased shares in a private company without the execution of a market standoff agreement. Many years later, the company is considering an IPO and I am being asked to sign a market standoff. My shares represent far less than 1% of the outstanding shares, and I am not sure I want to wait another 180 days if the company does eventually go public -- Do the underwriters typically demand that a small shareholder sign this? If so, is it negotiable? Thanks for any insight- Hello,

I purchased shares in a private company without the execution of a market standoff agreement. Many years later, the company is considering an IPO and I am being asked to sign a market standoff. My shares represent far less than 1% of the outstanding shares, and I am not sure I want to wait another 180 days if the company does eventually go public — Do the underwriters typically demand that a small shareholder sign this? If so, is it negotiable?

Thanks for any insight-

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