Pre-IPO and lock-up: financing restricted shares
An IPO does not automatically deliver liquidity to insiders. Lock-up agreements, regulatory restrictions, and market sensitivity can confine founders and early shareholders to an illiquid position for months or even years after a company lists. Black Haven structures financing against such positions, working within the constraints that apply.
The liquidity paradox for insiders
A founder who has built a company over many years may, on the day of listing, be technically worth many tens or hundreds of millions. Yet they may be unable to sell a single share for six to twelve months — or longer — because of lock-up undertakings given to the underwriting banks as a condition of the IPO. This is the insider liquidity paradox: extreme paper wealth accompanied by near-total inability to access cash. Personal tax obligations, business investment requirements, 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 mechanisms available to address this mismatch.
What lock-up agreements typically restrict
Lock-up agreements entered into as part of an IPO process typically prohibit the shareholder from selling, transferring, or otherwise disposing of their shares during the restricted period. The precise drafting matters considerably. Some lock-up agreements also restrict the pledging of shares, while others are silent on this point or carve out pledges in favour of regulated financial institutions. Before any financing is agreed, the lock-up documentation must be reviewed carefully — by the borrower’s own legal advisers and by Black Haven’s legal team — to confirm that the proposed structure does not constitute 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 — presents 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 depends on the strength of the business fundamentals, the credibility of the IPO pathway, the identity and track record of the management team, and a conservative assessment of value relative to anticipated proceeds. Loan-to-value ratios for pre-IPO structures are generally materially lower than those applicable to freely tradeable listed securities, reflecting the higher risk and illiquidity premium involved. Each situation requires careful case-by-case analysis.
Transition at IPO and post-listing flexibility
Where Black Haven has financed a pre-IPO position, the facility documentation will address what happens at listing — whether the loan migrates to a post-IPO structure with revised terms, whether additional liquidity is made available against the newly listed shares, and 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 appropriate for listed collateral. This transition planning is an important element of the initial structuring conversation, ensuring 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 be subject to regulatory restrictions on share dealing — including closed periods imposed by market abuse frameworks and obligations to disclose material transactions. In some jurisdictions, pledging shares may require disclosure or prior clearance. Black Haven expects borrowers to have conducted all necessary regulatory analysis and obtained all required approvals before proceeding with a facility. The transaction must be structured to comply fully with all applicable laws and contractual obligations, and 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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Read →A position to talk through?
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