Common Contracts
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LOCK-IN AGREEMENTS IN VENTURE CAPITAL BACKED UK IPOSApril 26th, 2002
This paper examines the impact of venture-capital backing of UK companies issuing shares at flotation on the characteristics of the lock-in agreements entered into by the existing shareholders, and on the abnormal returns realised around the expiry of the directors’ lock-in agreements. The study examines the lock-in agreements of a sample of 186 UK IPOs issued during 1992-98. 103 of these companies had venture-capital backing at the IPO. The sample is also broken down into firms classified by industrial sector: of 103 VC backed companies 48 are high-tech, and among the 83 firms without VC backing 33 are high-tech. We find that lock-in agreements in the UK show much more variety in terms of the contractual detail than US agreements. Lock-in periods are particularly long for venture-backed high-tech companies. By contrast, for firms not in the high- tech sector, venture-capital backing appears to reduce the directors’ lock-in periods. This suggests that for UK IPOs venture-capital backin
