Re-examining the IPO unlock day anomaly : do market conditions and increased availability of information matter?

The lockup agreement prohibits insiders and pre IPO shareholders from selling any of their stake in the company prior to the unlock date. Field and Hanka (2001) find that the unlock day is associated with significant abnormal returns. During the period of the Field and Hanka (2001) study the public was almost never reminded of the unlock date, other than the unlock date being available in the company's prospectus. However, as of October 1999, reminders of the unlock date have been widely available via internet sources. This study investigates if the greater degree of public information/scrutiny pertaining to the unlock day results in the elimination of the unlock day abnormal returns. Abnormal returns are found to be confined to firms having venture capital backing. Observed price adjustments tend to begin much earlier and declines appear more severe than previously reported. The study considers if the nature of the actual response observed at unlock is tied to the overall market sentiment at the time of IPO and unlock finding that firms making IPOs in cold markets are less affected at unlock than those firms making IPOs in hot markets. Further, many of the factors surrounding the IPO of a security act to lessen the informational asymmetries persisting at the time of the offering: the study confirms the relation of these IPO signalling factors as drivers of unlock day selling pressure. Furthermore, in the examination of the unlock day effect, consideration was also given to aftermarket price support and industry effects