Snap - owner of popular messaging app Snapchat - is going public on Thursday. And it expects anyone buying up to a quarter of its shares to agree not to sell them for a year.
Applying lock-ups helps companies moderate stock volatility.
A year-long lock-up period is atypically long, potentially signifying strong demand for the IPO, says Lauren Hirsch who covers the story for Reuters.
"There is at least one investor who, we're hearing from our sources, have asked to buy a really big chunk in the Snapchat IPO, and they kind of give assurance that they are really serious and committed to the company," Hirsch told Reuters. "They said, 'Not only do we want to buy a large chunk, but we promise that we'll hold it for a year.' So, that's really good news for Snapchat because they essentially have at least one very interested party, and a very interested party who will provide the stock with some stability when risk in any IPO is a turnover in volatility."
Snap is targeting a valuation of between $19.5 billion and $22.3 billion for its listing on the New York Stock Exchange on Thursday. It is looking to price 200 million shares on Wednesday night at a range of $14 to $16 a share.