Equity Compensation · 17 min read

IPO Lockup Expiration: What Employees Can Do Before Release

The Financial Sciences Company Published Sep 26, 2026

The short answer

An IPO lockup is a contract with the underwriters, not a securities law, that bars insiders and employees from selling for a set period, most often 180 days, with the terms in the prospectus. Many recent IPOs release shares in stages rather than on one day. A release is permission to sell, not a plan: your company’s trading window, your tax lots and any withholding gap decide what is workable on the date.

Most articles about IPO lockups say that one exists and that it usually lasts 180 days. That is true and not very useful on the day your shares are released. What an employee needs is the schedule in their own prospectus, the difference between a release and an open trading window, and a short list of things to have ready before the first date. This guide covers each, using the SpaceX and Cerebras prospectuses as examples of how a modern lockup is written. Tax figures are 2026 federal figures; confirm your own facts with a CPA or tax counsel.

What is an IPO lockup?

A lockup is a contract, not a securities law. Before an IPO, insiders, employees and large holders agree with the underwriters not to sell for a set period. The SEC’s investor glossary notes that most lockups run 180 days, that some also cap how many shares may be sold over a period, and that a company using one must disclose the terms in its registration documents, including the prospectus (Investor.gov, Initial Public Offerings: Lockup Agreements). Nothing in federal law requires a lockup; it exists because the underwriters and the company want an orderly market after the offering.

Two features follow. First, the lead underwriter can waive the lockup, in whole or in part, at any time, and every prospectus says so. Second, an employee is usually bound twice: through the lockup agreement signed with the underwriters, or a “market standoff” clause in the award or investor agreements, and through the company’s own insider trading policy. The Cerebras prospectus shows the layering: holders of about 71.4% of the stock signed lockup agreements with the underwriters, a further 4.9% and 23.7% were bound by market standoff provisions, and the company agreed to enforce those on the underwriters’ behalf (Cerebras Form 424(b)(4) prospectus, Underwriters).

Are lockups still a single 180-day cliff?

Often not. Recent large IPOs release shares in stages, tied to earnings, to the calendar, or to the share price. Two 2026 examples show the range:

Sources: SpaceX Form 424(b)(4) prospectus dated June 11, 2026, and Cerebras Form 424(b)(4) prospectus dated May 13, 2026, each in the sections named in the text. Percentages are ceilings on each holder’s locked shares, not instructions.
Company	End of the lockup	Early releases
SpaceX (Nasdaq: SPCX), 180-day group	December 8, 2026, day 180. Certain large holders follow an extended schedule into mid-2027, and the founder’s shares are locked 366 days with no early release.	Up to 20% two full trading days after second-quarter results; a further 10% only if the stock closed at least 30% above the $135 IPO price on five of the ten trading days ending on the results date; up to 7% on each of days 70, 90, 105, 120 and 135; up to 28% two full trading days after third-quarter results; the rest on day 180.
Cerebras (Nasdaq: CBRS)	The earlier of 6:00 a.m. Eastern on the second trading day after third-quarter 2026 earnings, or 180 days after the prospectus, November 9, 2026.	7.5% of non-executive employees’ eligible shares on the first trading day; further tranches on the second trading day after first-quarter and second-quarter earnings (15%, 7.5% and 16.7%, depending on the holder group and whether a defined release trigger was met); 6.7% on August 19, September 2 and September 16; 8.9% on September 30, October 14 and October 28.

Two design choices recur. Earnings-linked releases land just after the company reports, when most trading windows reopen. Price-linked bonuses release more shares only if the stock has held above a threshold, so a weak start leaves more locked to the end. That is what happened at SpaceX: the 10% bonus did not trigger, and those shares moved into the December 8 remainder (SpaceX Form 424(b)(4) prospectus, Underwriting—Lock-up Agreements). Our SpaceX lockup calendar tracks that schedule date by date.

How do I read the lockup section of my own prospectus?

The final prospectus is filed on EDGAR as Form 424(b)(4) within a few days of pricing. Search the company name at sec.gov, open the filing dated just after the pricing date, and use the table of contents. Two sections carry everything you need, and they are named the same way in almost every IPO.

“Shares Eligible for Future Sale”

This section answers “when can shares be sold, and how many.” Look for three things:

The release table. A table headed “Earliest Date Available for Sale in the Public Market” lists each date and the approximate number of shares. SpaceX’s runs from the second full trading day after the first earnings release through the extended-lockup dates in 2027, with a note on each row about whether affiliates are included (SpaceX Form 424(b)(4) prospectus, Shares Eligible for Future Sale).
Rule 144 and Rule 701. Shares issued before the IPO are “restricted securities.” Shares acquired under a compensatory plan before the IPO may be resold under Rule 701 beginning 90 days after the registration statement takes effect, without Rule 144’s holding period, and non-affiliates also skip its public-information, volume and notice conditions (17 CFR §230.701(g)). The prospectus repeats this in its own words, then adds the phrase that matters: subject to the lockup.
Form S-8. The company registers its plan shares on Form S-8 shortly after the IPO, so RSU and option shares delivered afterward can be sold once vested, again subject to the lockup and the trading policy.

“Underwriting—Lock-up Agreements”

This is the contract, summarized. It has a fixed anatomy, and SpaceX’s is a clear specimen (SpaceX Form 424(b)(4) prospectus, Underwriting, Lock-up Agreements):

The company’s own lockup. The company agrees not to issue or register new shares for 180 days, with exceptions for employee plans and the S-8 filing.
The holders’ lockup. It defines a “Transfer” broadly: sales, pledges, loans, short sales, puts, calls, forwards, swaps and “any hedging or other transaction” that shifts the economics of ownership, plus any public announcement of an intention to do those things.
The exceptions. Bona fide gifts and charitable contributions, estate-planning transfers to family members or trusts, transfers on death or divorce, net settlement and sell-to-cover on vesting awards, cash exercises of options, and, if the company permits, entry into a Rule 10b5-1 plan that does not trade until the lockup ends. Most exceptions require the recipient to sign a lockup for the balance of the period.
The early-release schedule. Dates, percentages, any price trigger, and which holder groups each release applies to.
The waiver clause. The underwriter who may release shares early is named: Goldman Sachs & Co. LLC for SpaceX; Morgan Stanley, Citigroup and Barclays for Cerebras.

Check the “Directed Share Program” paragraph as well. Shares bought at the IPO price through the employee allocation are usually not locked unless the buyer is already a lockup party, and both SpaceX and Cerebras say so. Then read your own lockup agreement or the market standoff clause in your award documents. The prospectus summarizes the form; your signed copy governs.

Does a lockup release mean I can sell that day?

No. A release removes the underwriters’ restriction. It does not open the company’s trading window, and for a current employee the window usually decides the date. Since 2023, public companies have had to disclose their insider trading policies and file them as an exhibit to the Form 10-K (17 CFR §229.408(b), Item 408 of Regulation S-K), so the mechanics are now readable in Exhibit 19 of each company’s annual report. Four examples:

Source: each company’s insider trading policy, filed as Exhibit 19.1 to its Form 10-K, linked in the sources list. Policies change; the filed version governs. Company names identify the policies discussed and imply no affiliation.
Company	Window closes	Window reopens
Nvidia	Five weeks before the end of the fiscal quarter	Second trading day after results (Nvidia insider trading policy, Ex. 19.1)
Apple	December 1, March 1, June 1 and September 1	About 24 hours after results (Apple insider trading policy, Ex. 19.1)
Alphabet	Level 8 and above: close of the first trading day of the quarter’s third month. Level 7 and below: close of the first trading day of the next fiscal quarter	Second trading day after results (Alphabet insider trading policy, Ex. 19.1)
Meta	Market close on the last day of the quarter’s middle month	Market open on the second full trading day after results (Meta insider trading policy, Ex. 19.1)

Apply that to a staggered schedule. A calendar release on day 120 or day 135 that lands after quarter-end and before results falls inside a closed window at every company in the table. The Cerebras prospectus says so directly: each early release is “subject to the provisions of Rule 144 and Rule 701 under the Securities Act and our insider trading compliance policy” (Cerebras Form 424(b)(4) prospectus, Underwriters). A newly public company’s first Exhibit 19 arrives with its first 10-K, so until then the policy comes from the employee handbook or the stock plan administrator, and the sensible step is to ask in writing which of your lots are released and whether your window is open.

Two related points. Sales under a Rule 10b5-1 plan may run during a closed window; Nvidia’s policy says trades under a plan already in effect may execute even while the person has material nonpublic information or the window is closed (Nvidia insider trading policy, Ex. 19.1). And former employees generally leave the policy when they leave the company, as Alphabet’s states (Alphabet insider trading policy, Ex. 19.1), but the law against trading on material nonpublic information does not depend on employment.

What can I do while shares are locked?

More than most holders assume, and the list comes from the prospectus rather than from hearsay. Under the SpaceX form of lockup agreement a holder may (SpaceX Form 424(b)(4) prospectus, Underwriting, Lock-up Agreements):

Enter into or amend a Rule 10b5-1 plan, if the company permits, provided nothing sells under it until the relevant release. The rule’s 30-day cooling-off period for employees who are not officers or directors can run while the lockup does (17 CFR §240.10b5-1(c)(1)(ii)(B)).
Make bona fide gifts, charitable contributions and estate-planning transfers to family members, trusts or wholly owned entities, provided nothing is received in return and the recipient signs a lockup for the remaining period.
Let RSUs vest and settle, including net settlement or sell-to-cover for withholding tax. The retained shares stay locked.
Exercise options for cash. The shares received are locked.
If the holder is not an officer, director or 10% owner, sell shares bought in the IPO or in the open market after pricing. Those were never locked.

What a holder may not do is sell, lend, pledge, short or hedge locked shares, or announce an intention to. That rules out collars and prepaid forwards on locked shares regardless of what a bank offers, and it rules out new margin loans against them. After release, the company’s policy takes over, and the four policies in the table above prohibit hedging outright and restrict or prohibit pledging.

What should be ready before the first release?

The useful work happens before the date, while there is time to think. Six items:

A lot list. For every lot: the date acquired, how it was acquired (option exercise, RSU settlement, ESPP purchase, tender, directed share program), the basis per share adjusted for any split, and the holding period. RSU shares take a basis equal to the value taxed as wages at settlement; option shares take the exercise price plus any spread already taxed; ESPP shares follow their own rules. Brokers’ 1099-B forms often show the wrong basis for equity compensation, so the plan administrator’s statements are the record to keep.
The withholding gap. RSUs that settle at the IPO are wages at settlement. Employers typically withhold at the 22% supplemental rate, rising to 37% only on supplemental wages above $1 million in the year (IRS Publication 15 (2026), section 7). For 2026 the 32% bracket begins at $201,775 of taxable income for single filers and $403,550 for joint filers, and the 35% bracket at $256,225 and $512,450 (IRS, tax year 2026 inflation adjustments). A household whose timely withholding and estimates reach 100% of last year’s tax, or 110% if last year’s adjusted gross income exceeded $150,000, generally avoids the underpayment penalty (26 U.S.C. §6654).
A written sell rule. One of the frameworks below, chosen before the date rather than on it.
Charitable lots. Shares held more than a year and given to a public charity or donor-advised fund are generally deductible at market value, up to 30% of adjusted gross income with a five-year carryover; shares held a year or less are deductible only at basis (IRS Publication 526). For 2026 and later, only the part of total gifts above 0.5% of adjusted gross income is deductible (26 U.S.C. §170(b)(1)(C) and (I)). RSU lots that settled in the past twelve months are short-term, and a gift of still-locked shares needs the recipient to sign a lockup.
State residency. If you moved between grant and settlement, the old state may still claim part of the income. California, for example, taxes RSU wages to the extent the work between grant and vest was done in California (California FTB Publication 1004). Keep the residency file current: lease or deed, driver’s license, voter registration, where you work.
The rest of the household. The cash reserve, a concentration target, beneficiary designations, and any ESPP purchase date that falls inside the lockup.

A hypothetical employee, worked through

The household below is hypothetical, the company is unnamed, and the $20 share price is a placeholder held flat so the arithmetic is visible. It is not a forecast. A married couple files jointly with $350,000 of taxable income before any equity event. One spouse holds two lots at a newly public company: 8,000 shares from options exercised four years ago at $2 a share (long-term, basis $2), and 5,000 RSUs that settled at the IPO at $20 (basis $20, short-term until a year after settlement). All 13,000 shares sit under a 180-day lockup that releases 25% two trading days after the first earnings report, 25% on day 120, and the rest on day 180.

Hypothetical, married filing jointly, 2026 federal brackets (Rev. Proc. 2025-32); supplemental withholding per IRS Publication 15. No state tax assumed. Illustrative only.
The RSU settlement at the IPO	Amount
5,000 RSUs settle at $20: wages	$100,000
Withheld at the 22% supplemental rate	$22,000
Federal tax: $53,550 fills the 24% bracket to $403,550 ($12,852), and $46,450 is taxed at 32% ($14,864)	$27,716
Gap to cover by estimated payment or April	$5,716

The schedule releases 3,250 shares after the first results, 3,250 on day 120 and 6,500 on day 180. Suppose their written rule is to sell half of each release, so 1,625 shares at the first one. Which lot they sell changes the tax on the same $32,500 of cash (Rev. Proc. 2025-32, section 4.03):

Hypothetical, married filing jointly, 2026 federal figures (Rev. Proc. 2025-32; IRC §1411). Illustrative only.
Selling 1,625 shares at $20	From the option lot	From the RSU lot
Proceeds	$32,500	$32,500
Basis	$3,250 (at $2)	$32,500 (at $20)
Gain	$29,250, long-term	$0
Federal tax at 15% (taxable income stays under $613,700)	$4,388	$0
Net investment income tax at 3.8% (income above $250,000)	$1,112	$0
Total federal tax on the sale	$5,500	$0

Neither column is the right answer. Selling the RSU lot costs nothing in tax today but leaves the low-basis lot, and its future gain, concentrated; selling the option lot pays $5,500 now and keeps the lot that becomes long-term next year. The net investment income tax applies because income exceeds the $250,000 joint threshold, which is not indexed (26 U.S.C. §1411). The point is that the lot list and the sell rule have to exist before the date, because a broker’s default is often first-in, first-out.

How do holders decide what to do with each tranche?

There is no single correct approach, but there are four common frameworks, and the useful discipline is to choose one before the first date and write it down. These are options, not advice.

Four sell-rule frameworks. Any of them can be written into a Rule 10b5-1 plan.
Framework	How it works	What it handles well	What to watch
Fixed percentage	Sell the same share of every release, whatever the price	Removes the timing decision; easy to automate	Sells the same amount into a weak market as a strong one
Price bands	Sell more of a release above a written price and less below it, on a grid set in advance	Holders who want a floor on regret in either direction	Bands are forecasts in disguise; if the price never reaches them the position stays concentrated
Need-based	Sell what funds named uses: the tax bill, a cash reserve, a house, debt	Ties sales to the household plan rather than to the stock	Stops once the needs are met, so concentration remains a separate decision
Concentration target	Sell until the position is below a set share of net worth, then hold the rest under a rule	Addresses single-stock risk directly	Needs an honest net-worth figure and a target the household will keep to

Beyond outright sales, four tools come up in most conversations about a large position. None applies to locked shares, and each has real limits.

Exchange fund. How it works: contribute shares to a partnership holding many stocks and, after about seven years, take back a diversified interest without a taxable sale at contribution, under IRC §721 (26 U.S.C. §721). Costs: management fees, the seven-year commitment, and the sponsor’s roughly 20% allocation to non-security assets. Risks: illiquidity, the fund’s own portfolio, and sponsor caps on any one stock, especially a newly listed one. Eligibility: generally accredited investors or qualified purchasers (17 CFR §230.501(a), accredited investor), with released shares that company policy allows you to transfer; Meta’s policy, for one, names exchange funds in its hedging ban (Meta insider trading policy, Ex. 19.1).
Prepaid variable forward or collar. How it works: options that set a floor and a cap on the shares, sometimes with cash advanced up front; a properly built prepaid forward is not a current sale (Rev. Rul. 2003-7). Costs: the dealer’s spread and the upside given away above the cap. Risks: constructive-sale treatment if the band is too tight (26 U.S.C. §1259), straddle rules, counterparty exposure. Eligibility: high-net-worth accounts at dealers; never on locked shares, and prohibited for employees under policies like the four above.
Donor-advised fund. How it works: give long-term shares, deduct at market value up to 30% of adjusted gross income, and the fund sells without tax. Costs: administrative fees; the gift is irrevocable. Risks: short-term lots are deductible only at basis, and from 2026 only gifts above the 0.5% floor count. Eligibility: anyone who itemizes; locked shares need a transferee lockup.
Charitable remainder trust. How it works: an irrevocable trust under IRC §664 sells the shares without immediate tax and pays the donor an income stream, with the remainder to charity (26 U.S.C. §664). Costs: legal setup, trustee fees, annual filings. Risks: irrevocability, payout rules, less passing to heirs. Eligibility: no investor test, but the position must be large enough to justify the cost.

How we approach a lockup in a plan

We treat a lockup as a sequence of dated decisions rather than a countdown. The work starts with the lot list, then each release gets a written rule, and the rule is tested against the whole household: this year’s tax on gains and settlements, cash needs, and how much of the family’s net worth should depend on one employer. That is the core of our work on equity compensation and concentrated stock, and for a specific company the same method produces a dated calendar, as on our page for SpaceX employees.

The tax side connects to planning capital gains after a liquidity event, and tax should inform the decision without steering it, a trade-off we cover in when tax planning distorts the portfolio. We coordinate estimates and residency questions with the household’s CPA through our tax planning process; executives with additional trading restrictions can start with our page for executives and equity compensation.

What this does not mean

A release date is not a recommendation. Nothing here suggests selling, holding or buying any company’s stock on any date, and the frameworks describe how a decision can be structured, not what it should be. It is not a price forecast either: the number of shares that becomes eligible to trade says nothing reliable about the price on the day, and we do not predict it.

It is also not a substitute for your own documents. The prospectus summarizes a form of agreement; your signed lockup, your award agreements and your employer’s current insider trading policy govern, and they can change. Tax figures reflect 2026 federal law and a hypothetical household; your return depends on facts we have not seen.

Frequently asked questions

How long is a typical IPO lockup?

Most run 180 days from the prospectus date, which is why the SEC’s investor glossary uses that figure, but the length is contractual and varies. Some run 90 days, some are staged, and some end early after an earnings release. The exact term is in the prospectus under “Shares Eligible for Future Sale” and in the underwriting section on lock-up agreements.

Can a lockup end early?

Yes, in two ways. Many prospectuses build in automatic early releases tied to earnings dates, calendar dates or the share price. Separately, the lead underwriter can waive the lockup for some or all holders at any time. Neither is predictable in advance, and a company’s trading window can still be closed when a release arrives.

Does a lockup apply to former employees?

Usually yes. The lockup follows the holder who signed it, or the market standoff clause in the award documents, and leaving the company does not end it. What generally does end at departure is the employer’s trading policy, although the law against trading on material nonpublic information still applies to anyone who has it.

What happens to the stock price when a lockup expires?

We do not forecast it. The SEC notes that a stock price may fall in anticipation of locked shares reaching the market, and the size of a release is public information that traders already see. Staged schedules spread the supply over months, which is one reason companies use them. A household’s plan should work whether the price is higher or lower on the day.

Can I gift shares during the lockup?

Under the common form of lockup agreement, yes: bona fide gifts, charitable contributions and estate-planning transfers are permitted if nothing is received in return and the recipient signs a lockup for the remaining period. Ask the charity or trustee whether they will sign before you count on the gift, and note that the deduction for shares held a year or less is limited to basis.

Do RSUs that vest during the lockup stay locked?

Yes. Vesting and settlement are permitted during the lockup, and shares may be sold or withheld to cover the tax, but the shares you keep are locked on the same schedule as the rest. The wages are taxed at settlement regardless, which is why the withholding gap belongs on the pre-release checklist.

Sources and further reading

Next steps

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The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.

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