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There’s a rule that most companies going public abide by. Insiders—including executives, directors and significant shareholders—are prohibited from selling their shares for a set period after the IPO.
In a vast majority of cases, insiders—including executives, directors and significant shareholders—agree not to sell their shares for a set period after the IPO.
The restriction, known as a lock-up, is meant to stabilize the stock price by limiting the supply of shares during the volatile early months. The lock-up window typically runs 180 days, though it can be as short as 90 days.
A handful of recent PE-backed IPOs have done away with the lock-up or at least compressed the timeline. While this makes sense in a market where investors want quick cash, for some, it raises questions about sponsors’ conviction in the businesses they’ve listed and the broader purpose of public markets.
Take Forgent Power Solutions, an electrical equipment maker owned by San Diego-based PE firm Neos Partners.
Forgent went public in early February this year. Since then, the company and its sponsor have completed three rounds of follow-on stock offerings—in March, June and early July—each within the 180-day lock-up window.
Roughly 182 million shares changed hands, including those sold in the IPO, for about $7 billion in gross value, according to a PitchBook analysis of public filings. The offerings raised around $6.3 billion in proceeds before expenses. Forgent used all of its proceeds to redeem the equity interest held by Neos, while the proceeds from Neos’ own registered share sales stayed with the PE firm, the filings show.
The sales allowed Neos to unwind its position at a striking pace. The energy transition and infrastructure specialist reduced its voting power from about 81% just after the IPO to below 50% in the span of five months.
Goldman Sachs, Jefferies and Morgan Stanley led all three follow-ons and were also the lead underwriters on Forgent’s IPO.
Forgent, Neos and the banks didn’t respond to a request for comment.
Seeking an early release to take some chips off the table—and ride an IPO stock’s strong trading momentum—has become increasingly common among PE-backed listings, even if not every sponsor has moved at Forgent’s pace.
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