| Icahn owned a bunch of Lyft stock before the IPO. Lyft, as a company, issued new shares in an IPO. As is standard practice for an IPO in which the company issues new shares to raise money, Lyft required all of existing stockholders to agree not to sell stock on the public market for the next 6 months. So for 6 months, the shares trading under the "LYFT" ticket, will represent only those shares sold by Lyft to public market investors, and then passed on from one public market participant to another. After 6 months, all shares will be equal, and early investors and employees can sell their shares. Icahn couldn't sell his shares on the public market. But he was allowed to sell shares in a private transaction (to an accredited investor, with all the usual qualifications for a private stock sale). The only relevant restriction Lyft imposed was that Icahn get his buyer to sign a similar agreement with Lyft, under which Soros can't sell those shares for the same six months. The restriction is actually a little stronger than just not selling those pre-IPO shares. They also aren't allowed to engage in any financial maneuvering which in any way has some of the effect of selling pre-IPO shares. But Soros didn't mind. By the time he bought the shares from Icahn and signed onto the agreement not to sell them, he'd already sold them! Well, he'd made what was effectively a binding agreement to sell that many shares of Lyft, at a price to be determined immediately after the IPO, but with the shares and money not changing hands until 6 months later! This is exactly what the lockup agreement prevent you from arranging once you have the shares. The agreement Soros made was something like: "I bet that Lyft stock will be lower in 6 months than it is next week. If it goes up I'll pay you 10 Million times the amount it goes up, and if it goes down then you pay me that instead. And the bank said sure, as long as you pay us a small fee upfront, win or lose." So in six months, when the lockup ends, Soros will sell 10 million shares on the public market, and if that is above the post-IPO price, he'll pay the excess to the bank. If it is instead below the IPO price, the bank will pay him the difference. So he's effectively locked into the post-IPO price. |