Understanding Lockups: Effects in Bankruptcy and the Market for Corporate Control

Abstract

This Article examines the effects of lockups in the market for corporate control and bankruptcy. Developments in the analysis of lockups in the market for corporate control have provided prescriptions that are accurate from either an ex ante or ex post perspective. This Article employs auction theory to articulate a synthesis of the current theory that is satisfactory from both perspectives. Theory addressing lockups in bankruptcy is unsatisfactory from both an ex ante and ex post context. By delineating the crucial differences between bankruptcy and the market for corporate control, this Article develops appropriate standards for governing lockups in bankruptcy.