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How Snap’s IPO Lockup Hurts Employees

About five months after Snap goes public early in March, it will cross an important milestone as a public company. At that time, co-founders Evan Spiegel and Bobby Murphy as well as other pre-IPO investors will be free to cash out and sell stock on the public markets, according to the IPO filing. But employees will have to wait another month before they can sell any of their shares.

UPDATE: Snap offered new agreements to employees allowing them to sell at the same time as co-founders and other pre-IPO investors. For more details, see this story.

It’s typical for early shareholders to have to wait months after an IPO before being able to sell their shares, known as a “lockup” restriction. But it is rare for most investors to be allowed to sell before employees, said Dan Walter, president of compensation consulting firm Performensation. The delay could cost employees, as any earlier selling by longtime shareholders may well have sent the stock falling.

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