Canadian IPO Share Releases

Abstract

This article provides the first examination of the design, impact and market behavior of two types of lockups for Canadian IPOs listed on the TSX during the 1997–2005 period. Lower IPO underpricing is not related with the existence of lockup information in an issuer's prospectus. IPO firms with dual-class share structures have higher lockup proportions and longer escrow lockup periods, and larger firms have higher lockup escrow proportions. Only high-tech firms exhibit significant negative abnormal returns around unlock days. Lower abnormal trading volumes and relative spreads occur after unlock days only for the IPOs with escrow lockups with stipulated nonzero lockup lengths.