Lockup Agreements and Survival of UK IPOs

This paper examines the role of lockup agreements on the survival of 580 UK Initial Public Offerings (IPOs) during the period of 1990-2011. Our accelerated failure time (AFT) survival model shows a statistically and economically significant effect of lockup length on the post-IPO survival. A 12 month increase in median lockup period increases the (median) survival time by 27%. Furthermore, the failure rates for IPOs with longer lockups are consistently lower than the failure rates for IPOs with shorter lockups regardless of delisting reasons. The results are robust to choice of different survival estimation models, heterogeneity, clustering, and alternative specification of variables. Our results highlight the importance of lockup characteristics on the subsequent survival of newly listed firms and inform recent debate regarding alleged short-termism in the UK equity market.