Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Lockup Expirations Create the Real IPO Window
Transcript
- Lucas: You know, when a startup goes public, everyone watches the first-day pop. But the real story — the one that determines whether founders actually walk away with life-changing wealth — happens months later, when the lockup expires. Luna: Right. That's when the insiders can finally sell. And a lot of times, that's when the stock actually finds its true price. Lucas: Exactly. We saw this with Coinbase back in 2021. The stock opened around $381, popped to $429, then over the next year it fell more than 80% as lockup after lockup expired and insiders sold. The first-day pop was a mirage. Luna: So the lockup expiration is really the moment of truth. And I know the market is nervous about a bunch of upcoming expirations right now. Just this week, we've seen some movement. Lucas: We have. And the data's interesting. Take the five-day performance on some big names: Coinbase is actually up 4.5% in the last five days, while Rivian is down nearly 7%. That gap might reflect how the market prices each company's lockup overhang. Luna: Rivian's had a rough go. Their lockup expired last year and the stock just kept sliding. But Coinbase seems to have found a floor. Is that just because crypto is hot again? Lucas: Partly, but it's also about lockup structure. Coinbase used a direct listing with a staggered lockup — different tranches of insiders got unlocked at 90 days, 180 days, and so on. That smoothed the selling pressure. Rivian had a more traditional 180-day lockup for all insiders, and when it lifted, the floodgates opened. Luna: So the smart move for founders is to negotiate a staggered lockup before the IPO. Don't let all your shares unlock on the same day. Lucas: Absolutely. And we're seeing more late-stage unicorns adopt that. It's become a selling point in the IPO roadshow — 'Look, our insiders are committed, but not all at once.' Investors like it because it reduces the cliff. Luna: But even with a staggered lockup, founders still face a dilemma. They can't sell before the lockup lifts, but they're exposed to market risk the whole time. What if the stock tanks before they can sell? Lucas: That's where hedging comes in. Founders can use something called a collar strategy. You buy a put option to set a floor on your stock, and sell a call option to finance it. That caps your upside but protects you from a drop. Luna: I've heard of that. It's like insurance. But isn't there a risk that the SEC or the company's board frowns on insiders hedging? They want founders to have 'skin in the game.' Lucas: Yeah, it's a tension. Some boards prohibit hedging during the lockup. But many allow it if it's pre-arranged through a 10b5-1 plan. The key is to set it up before the lockup expires, so it's not insider trading. Luna: So the playbook is: negotiate a staggered lockup, then put a collar on your shares before the first tranche unlocks. That way you're protected whether the stock goes up or down. Lucas: Right. And there's another tool: exchange funds. A founder can contribute their concentrated stock to a diversified fund in exchange for shares of the fund. That defers capital gains and reduces single-stock risk. It's become more popular with tech founders sitting on huge positions. Luna: But exchange funds usually require you to lock up your shares for five to seven years. That's a long time if you need liquidity sooner. Lucas: True. It's not for everyone. But for founders who don't need cash today and want to defer taxes, it's compelling. Especially with valuations where they are now. A founder with a billion-dollar stake could save millions in taxes. Luna: Let's talk about the current environment. We're in June 2026, the market's been choppy. The S&P 500 is down, tech stocks are under pressure. How does that affect lockup planning? Lucas: It makes it trickier. When the market is down, lockup expirations can amplify the selling pressure because everyone wants to get out. But it also means that if a founder hedged, they're in a much better position. Luna: And for companies planning an IPO later this year, what should they be thinking about lockup duration? Lucas: I think we'll see shorter lockups. The standard 180 days is becoming less common. Some companies are doing 90 days, or even 45. The idea is to get the overhang out of the way quickly so the stock can find its natural level. Luna: But doesn't that scare off institutional investors? They want to see insiders committed for a while. Lucas: It's a balance. But with so many IPOs in the pipeline — there are hundreds of unicorns waiting to go public — companies need to differentiate. A shorter lockup can be a signal of confidence: 'We're not hiding behind the lockup; we're ready to trade.' Luna: And the data backs that up. Studies show that companies with shorter lockups don't necessarily have worse post ipo performance. It's more about the fundamentals. Lucas: Exactly. The lockup is just a mechanism. What really matters is whether the business is profitable, growing, and has a clear path. If it does, the lockup expiration is just a blip. Luna: But if it doesn't, then the lockup expiration can be a death spiral. We saw that with a lot of the 2021 SPACs. Once insiders could sell, the stocks cratered. Lucas: Right. And we're seeing a new wave of SPACs now. Just this week, there's news about Quantum Space using a SPAC to go public, trying to catch the SpaceX IPO wave. Those investors should pay close attention to lockup terms. Luna: Absolutely. So for founders listening: what's the one concrete thing they should do today if they're planning an IPO in the next 12 months? Lucas: Talk to your underwriter about lockup structure. Push for staggered tranches. And then talk to your wealth manager about hedging. Don't wait until after the IPO. The time to plan is now. Luna: And for investors buying into IPOs, don't just look at the offering price. Look at the lockup calendar. It tells you when the real supply is coming. Lucas: Yeah. And speaking of supporting the show, a quick note — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these. So if you find these conversations useful, that's the place. Luna: Yeah, it helps us keep this ad-free and focused on the stuff that matters. We appreciate it. Lucas: So back to lockups — one final thought. The best time to think about your exit strategy is before you even file your S-1. Because once the clock starts ticking, you can't rewind it. Luna: Well said. That's a wrap for this episode. Thanks for listening.