IPO lockup expiration in the Middle East and North Africa

We examine stock market reaction to IPO lockup expiration for a sample of 60 companies in the Middle East and North Africa (MENA) region. Lockups in the MENA are set by regulators as opposed to being negotiated between firms and their underwriters, and are typically longer but vary less than those in the United States. The MENA therefore provides a unique environment in which to study the relationship between lockup length, firm ownership, and market reaction. We find that prices decline on unlock day much the same as they do in the United States. Longer lockups are associated with smaller declines, and this association is driven by non-family owned firms. We also find that family firms subject to longer lockups are more likely to experience bigger declines (or smaller increases) in trading volume than family firms under short lockup, but no such an association exists for non-family firms. Lockup length is negatively related to firm size and positively related to the fraction of IPO shares on offer that are primary, which is consistent with regulators setting shorter lockups for well-established firms and those signaling an ongoing commitment to the business. And while evidence of general IPO underpricing is inconclusive for the MENA, family firms that face short lockups are significantly more likely to enjoy higher returns on their first day of trading than family firms that face long lockups.