NTPC Green Energy Faces Sharpest Fall in Single Day as Anchor Lock-In Period Ends

Shares of NTPC Green Energy, a recently listed renewable energy firm, witnessed a sharp decline of over 5% on December 26 as of 9:41 am. The drop coincided with the expiry of the one-month lock-in period for anchor investors. The stock hit a 3-week low as 1.83 crore shares, representing a 2% stake in the company, became eligible for trading.

This development has raised concerns that anchor investors might offload up to 50% of their holdings, potentially putting downward pressure on the stock price. However, it is important to note that the expiry of the lock-in period does not necessarily lead to an immediate sell-off but merely provides the eligibility to trade.

What Is a Lock-In Period?

A lock-in period refers to a predetermined timeframe during which certain shareholders are restricted from selling or transferring their shares in the stock market. Typically, companies impose such restrictions following an Initial Public Offering (IPO) to promote stability and prevent large-scale sell-offs that could result in sharp price volatility.

While lock-in periods usually extend to six months or even a year, shorter durations, such as one month, may be applicable in specific cases. During this period, shareholders, including company promoters, insiders, and anchor investors, are required to hold onto their shares.

Why Do Companies Enforce Lock-In Periods?

Lock-in periods are implemented to stabilise stock prices after a public listing. By restricting the sale of shares, companies aim to:

1. Prevent Market Volatility: Avoid sudden sell-offs that may cause drastic price movements.
2. Instil Investor Confidence: Showcase long-term commitment by major investors, which can attract retail investors.
3. Support Long-Term Growth: Provide the company with time to demonstrate operational performance post-listing.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.