Pre-IPO and lock-up: financing restricted shares
An IPO does not automatically give insiders liquidity. Lock-up agreements, regulatory restrictions, and market sensitivity can leave founders and early shareholders unable to sell for months or even years after listing. Black Haven structures financing against such positions, working within the constraints that apply.
The liquidity paradox for insiders
A founder may have spent many years building a company. On the day of listing, they may be worth tens or even hundreds of millions on paper. Yet they may be unable to sell a single share for six to twelve months — or longer. Lock-up undertakings, given to the underwriting banks as a condition of the IPO, forbid it. This is the insider liquidity paradox: extreme paper wealth with almost no access to cash. Personal tax bills, business investment needs, and life events do not pause for the lock-up window. Financing against the position — rather than waiting for the window to open — is one of the few ways to address the mismatch.
What lock-up agreements typically restrict
Lock-up agreements signed as part of an IPO typically bar the shareholder from selling or transferring shares during the restricted period. They usually cover any other form of disposal too. The precise drafting matters a great deal. Some lock-up agreements also restrict the pledging of shares. Others are silent on the point, or carve out pledges in favour of regulated financial institutions. Before any financing is agreed, the lock-up documentation must be reviewed carefully. Both the borrower’s own legal advisers and Black Haven’s legal team must confirm that the proposed structure is not a breach. Black Haven will not proceed with a transaction that, on its face, would violate a lock-up undertaking.
Financing pre-IPO shares before listing
Pre-IPO financing — lending against shares in a company that has not yet listed — brings distinct challenges. The shares are illiquid, there is no public market price, and the IPO outcome is uncertain. Where such financing is available, it typically rests on the strength of the business fundamentals and the credibility of the IPO pathway. It also depends on the identity and track record of the management team. Finally, it requires a conservative assessment of value relative to anticipated proceeds. Loan-to-value ratios for pre-IPO structures are generally materially lower than those for freely tradeable listed securities. This reflects the higher risk and the illiquidity premium involved. Each situation requires careful case-by-case analysis.
Transition at IPO and post-listing flexibility
Where Black Haven finances a pre-IPO position, the facility documentation will set out what happens at listing. It covers whether the loan migrates to a post-IPO structure with revised terms. It covers whether additional liquidity is made available against the newly listed shares. And it covers how the collateral position is managed during the lock-up period. Once the lock-up expires and the shares become freely transferable, the facility may be restructured on terms suited to listed collateral. This transition planning is an important part of the initial structuring conversation. It ensures there are no operational surprises at the point of listing.
Working with regulatory and contractual constraints
Beyond lock-up agreements, insiders at listed companies may face regulatory restrictions on share dealing. These include closed periods imposed by market abuse frameworks and duties to disclose material transactions. In some jurisdictions, pledging shares may require disclosure or prior clearance. Black Haven expects borrowers to have carried out all necessary regulatory analysis, and to have obtained all required approvals, before proceeding with a facility. The transaction must be structured to comply fully with all applicable laws and contractual obligations. Black Haven reserves the right to decline or restructure any transaction where compliance cannot be confirmed.
Frequently asked.
01Can Black Haven lend against shares that are subject to a lock-up agreement?
02Is pre-IPO financing available, and how is value assessed?
03What happens to the loan when the lock-up period expires?
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