Turkish Lock-up Undertakings In Public Offerings

1. General

Various mechanisms are employed in public offering processes to establish investor confidence and preserve the stability of share prices. One such mechanism is the arrangement known as a “lock-up undertaking“, which refers to the undertaking by the issuer and the existing shareholders of the issuer not to sell, transfer, or otherwise dispose of their shares for a specified period. Lock-up undertakings are essentially aimed at preventing a sudden and intensive supply of shares to the market following a public offering, thereby serving to maintain the supply-demand balance and ensure price stability.

Lock-up undertakings are of particular significance with respect to initial public offerings, as they influence market dynamics by restricting the supply of shares to the market for a certain period following the public offering. Indeed, the simultaneous release of such shares into the market after a public offering may create an oversupply, leading to declines in share prices