Depending on the company, the IPO lock-up period typically lasts between 90 and 180 days before these shareholders are allowed the right, but not the obligation, to exercise the option.
Lockups are designed to prevent insiders from liquidating assets too quickly after a company goes public.
When employees and pre-IPO investors initially get their shares or options, they sign a contract with the company that typically prohibits trades for the first 90–180 days after a future IPO.
When the company is ready to go public, the underwriting bank then reaffirms the existing agreements in new contracts.
This helps to ensure the market will not disproportionately increase the supply, which drives prices downward.