Lock-Up Agreement Australia 2025: Investor Guide to IPO Rules

Lock-up agreements may sound like legal jargon reserved for the backrooms of investment banks, but in 2025, they’re front and centre in Australia’s IPO scene. As more high-profile companies list on the ASX, these contracts have become a critical mechanism for protecting investor interests and ensuring market stability.

What is a Lock-Up Agreement?

A lock-up agreement is a legally binding contract that prevents major shareholders—typically founders, executives, and early investors—from selling their shares for a specified period after a company goes public. In 2025, most Australian IPOs feature lock-up periods ranging from three to 24 months, with six or 12 months being the norm for ASX listings. These agreements are designed to prevent a flood of shares from hitting the market immediately after listing, which could destabilise the share price and erode investor confidence.

For example, when a fintech unicorn listed on the ASX in late 2024, founders and early backers were restricted from selling any shares for 12 months. This reassured new investors that the company’s insiders were committed to the long-term vision and that there wouldn’t be an immediate sell-off.

Why Are Lock-Up Agreements Important in 2025?

The Australian Securities and Investments Commission (ASIC) has introduced stricter guidelines for IPO disclosures and post-listing activities in response to the volatile market conditions of recent years. The updated 2025 ASX Listing Rules recommend clear disclosure of lock-up terms, including:

• Which shareholders are subject to lock-up

• The percentage of shares locked up

• The exact lock-up period

• Any staged or partial releases

This transparency is vital for retail and institutional investors alike. Knowing when large tranches of shares might become available helps investors anticipate potential price movements. For example, a 2025 biotech IPO disclosed that 80% of insider shares would be locked up for 18 months, with a staged release at 6, 12, and 18 months, giving investors a timeline for possible share price volatility.

Impacts on Investors, Founders, and the Market

Lock-up agreements benefit the entire ecosystem:

• Investors: They get protection from sudden insider sell-downs, reducing the risk of short-term price crashes.

• Founders and Early Investors: While they’re restricted from selling, a lock-up signals confidence in the business’s future and can support a stronger IPO valuation.

• The Market: Lock-ups encourage a stable post-IPO trading environment, which is essential for the reputation of the ASX and Australia’s broader capital markets.

There are, however, exceptions. Lock-ups can be waived in special circumstances, such as a takeover bid or board-approved secondary offering, but these are typically disclosed upfront and require ASX approval. In 2025, the ASX has tightened its policies around early lock-up releases to prevent backdoor selling and protect smaller investors.

Real-World Example: The 2025 MedTech IPO

Consider the much-anticipated MedTech IPO in March 2025. The company’s prospectus detailed a 12-month lock-up for all founders and VC funds, with a staggered release: 30% of shares after six months (subject to performance milestones), the remainder after 12 months. When the six-month mark approached, analysts warned of increased volatility, and the company’s investor relations team proactively communicated the rationale and future plans to the market. The result? Minimal disruption, increased investor trust, and a strong share price recovery after the lock-up expired.

Key Takeaways for 2025

• Lock-up agreements are now standard for most significant ASX IPOs.

• 2025 policy updates require greater transparency and stricter enforcement.

• Investors should always check the prospectus for lock-up details to anticipate future share supply and potential volatility.

• Exceptions and early releases are possible, but they’re more tightly regulated than ever.