This paper examines the impact of venture-capital (VC) backing on the characteristics of voluntary lock-in agreements entered into by the existing shareholders of UK IPOs, and on the abnormal returns around the expiry of the directors' lock-in agreements. Overall, we find that venture-capital backing acts as a complement rather than a substitute for lock-in contracts.
We also examine the share-price performance of IPOs with and without VC backing around the time of the expiry of the lock-in agreements. We find that the cumulative average abnormal returns for the VC-backed stocks are lower for most of the short windows around the expiry date. We also examine some UK companies in more detail. Different motivations for the lock-in agreements are uncovered such as the founder's commitment not to exit the company (as he did in an earlier venture which subsequently failed) in one case, and the poor pre-IPO earnings performance in another case.
For decades and decades, Delaware has been the undisputed leader in the market for corporate law. And yet, it is now clear that Delaware’s superiority...