When Airbnb filed to go public on Monday, its IPO prospectus contained a provision that until recently wasn’t common for public offerings: Its employees will be allowed to sell up to 15% of their shares within the first week of trading in December. And they’ll be able to sell even more shares if Airbnb’s stock price trades at a certain level after the company’s first earnings report early next year.
The provisions signaled a notable departure from one of the long-standing restrictions on IPOs: lockups that prevent most shareholders holding stock before the offering from selling for six months after the company goes public. That years-old rule has led to situations where employees and other early shareholders have had to watch a stock soar in the first months of an offering, unable to take advantage of its success. It has also helped fuel the popularity of direct listings, in which companies go public by listing their existing shares without selling new stock. Most of the tech companies that have gone public via a direct listing haven’t restricted employees or other investors from selling immediately.