About 50 million shares purchased in the IPO would be subject to a one-year lock-up.
Snap, owner of popular messaging app Snapchat, disclosed on Monday that it expected investors buying up to a quarter of the shares in its $3.2 billion initial public offering this week to agree not to sell them for a year.
While Snap cautioned it had no binding commitments yet from investors accepting such a lock-up period, the disclosure is a sign of confidence from the company in what is expected to be the biggest U.S. IPO since Facebook fb .
Lock-up periods help companies moderate stock volatility by preventing company insiders from selling their shares within an allotted time. A year-long lock-up period is atypically long, potentially signifying strong demand for the IPO.
Snap is targeting a valuation of between $19.5 billion and $22.3 billion from listing on the New York Stock Exchange on Thursday. It is looking to price 200 million shares on Wednesday night at a range of $14 to $16 dollars a share.
Orders for the IPO have begun to come in at the high-end of its range, and its “book” is already oversubscribed, according to people familiar with the process who requested anonymity.
In its updated IPO registration document with the U.S. Securities and Exchange Commission on Monday, Snap said it expected approximately 50 million shares of its Class A common stock purchased by investors in the offering to be subject to a separate one-year lock-up agreement. The roughly 50 million shares are designated for new Snap IPO investors who do not currently have a stake in the company, the sources said.
Lock-up periods can buoy companies at risk of a stock selloff in the months following their IPO. This risk is particularly strong for companies in the technology sector. Eight of the 10 biggest technology IPOs fell by between 25% and 71% in their first 12 months on the public market, according to a Reuters analysis of market performance.