Lock-up expiration is the first day most employees can legally sell their shares. It is also a day when many other insiders can sell too, which is part of why prices often move around it. This post lays out what tends to happen around expiration, the factors that bear on timing, and the main ways people handle the decision. It does not recommend a path.
What tends to happen to the stock price around lock-up expiration?
On average, prices have tended to weaken heading into and around the expiration date, though the effect varies widely and is not guaranteed. A recent analysis by the investment firm NISA, published in July 2026, covered 543 common stock IPOs from January 2019 to December 2025 and found that shares underperformed the S&P 500 by an average of 20.4% between the first-day close and the lock-up release date. That measures the run-up to expiration, not the expiration day itself. For the day itself, a Wealthfront analysis of 254 tech IPOs from 2000 to 2011 found an average one-day decline of about 1.15% right after expiration, with trading volume up 178% on average, and most stocks recovering within a day or two. An older academic study of 2,529 IPOs from 1988 to 1997 also found negative average returns around expiration, concentrated in venture-backed firms. The Wealthfront and academic samples are old, and all of these are averages. Individual stocks can do the opposite, and the weakest group in the Wealthfront sample did not rebound during the period studied.
Why might prices move around expiration?
The leading explanation is supply: a large block of shares becomes eligible to sell at once, and traders anticipate that. Researchers also point to information effects, since the date is known in advance and insiders’ decision to sell or hold can signal their view of the company. Neither explanation means a given stock will drop, only that expiration is a date when volume and volatility are often higher than usual.
What are the reasons people sell quickly?
Common reasons include reducing concentration, since a large share of net worth in one stock carries single-company risk; funding a known expense, such as a tax bill from earlier exercises or a home purchase; and certainty, since a sale turns a fluctuating paper value into cash. Some employees also have a pre-set plan, such as a Rule 10b5-1 trading plan that sells a fixed number of shares on a schedule, which removes the need to pick a single day.
What are the reasons people wait or sell gradually?
People who hold or sell in stages often cite a view that the company’s value may continue to grow, a wish to avoid selling into the expiration-day volume, tax considerations around holding periods, or simply spreading sales over time to reduce the effect of any one day’s price. Staged selling reduces timing risk in either direction but leaves some exposure to the company’s stock in the meantime.
How do taxes bear on the timing?
Holding periods matter. Gains on shares held more than one year after exercise are generally taxed at long-term capital gains rates, while shorter holds are taxed at ordinary income rates. For incentive stock options (ISOs), a qualifying disposition requires holding at least one year from exercise and two years from grant, and selling earlier is a disqualifying disposition that turns part of the gain into ordinary income. If you exercised options shortly before the IPO, the date of your exercise may matter more to your tax result than the lock-up date. Selling shares that vested as RSUs after the lock-up is generally taxed on any gain since the vest-date value, since the vest itself was the ordinary income event.
Can I sell on the first day, even if the lock-up ends?
Not necessarily. After expiration, you may still be blocked by your company’s insider trading policy, which typically closes trading windows around earnings and when you possess material non-public information. This is why some employees set up a 10b5-1 plan in advance. Your equity administrator or legal team can tell you when your window opens.
Worked example
Say you hold 10,000 shares from a prior exercise, with a $5 strike price, and the stock trades at $40 when the lock-up expires. Your shares were exercised more than a year ago.
Sell all at $40: 10,000 × $40 = $400,000 gross; gain over strike is 10,000 × ($40 − $5) = $350,000, taxed at long-term rates (federal top rate 20% plus 3.8% net investment income tax, so up to $83,300 federal before state), leaving roughly $316,700 before state taxes.
If the price drops 10% on expiration day to $36 and you sell all: gain falls to $310,000 and tax to about $73,800, leaving roughly $286,200 before state taxes.
Sell in four equal parts over four months: the outcome depends on the prices at each date, which could be higher or lower than $40; this reduces exposure to any single day but keeps part of the position at risk.
These are illustrations of how timing affects the numbers, not predictions.
FAQ
Does the stock always drop when a lock-up expires? No. Research shows an average dip around expiration, but outcomes vary widely by company, and many stocks rise.
Can I sell right at the open on the first day? Only if your company’s trading window is open and you do not hold material non-public information. Many people also wait for volume to settle, but that is a personal choice.
What is a 10b5-1 plan? A written plan, set up in advance while you are not aware of material non-public information, that schedules future sales automatically. It can provide a defense against insider trading claims, but rules and cooling-off periods apply, so it is worth discussing with counsel.
Do I owe taxes if I do not sell? Not on unrealized gains. But taxes can arise from events like RSU vesting or option exercises during the same period.
Is selling everything at once better than staging sales? Neither is universally better. A single sale removes exposure fastest; staged sales spread timing risk but keep some exposure. The right mix depends on your goals and risk tolerance.
What to do next
Your actual lock-up date, tax basis, and trading window are in your company’s documents and your own records. You can model your own numbers at movewealth.io.
MoveWealth is not a broker-dealer, investment adviser, or lender. This is educational content, not financial, tax, or legal advice. Consult a qualified professional about your specific situation.