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Subject:   Pre-IPO market lock up question
Date:   Tue, 31 May 2005
From:   Charles

I have exercised all of my stock options from my previous employer, which is planning to go public soon. The underwriters are requiring all of the company's equity holders to sign a lock up agreement lasting 180 days after the closing of the IPO. Since I am no longer an employee, why should I sign the lock up agreement?

Thanks,
Charles

Answer

Date:   June 10, 2005

Hello Charles,

If your refusal to sign the lock up agreement results in the company not being able to make its public offering, you won't have a market to sell your stock. If you aren't willing to wait the 180-day period, ask if the company is willing to negotiate to redeem your shares or if another employee is willing to make a private purchase of the shares.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.