Question

GS Investment Bank is worried that the company it is underwriting for an IPO may not be well supported since investors may sell additional shares into the market after the IPO. To prevent this from happening, GS Investment Bank may restrict the ability of officers, directors and other shareholders to sell any of their shares for a specific period of time after the IPO. This is known as a:

Answer 1

A lock-up agreement

Step-by-step explanation:

A lock-up agreement -

In common terms, it is also known as initial public offering (IPO) process.

It refers to a type of agreement, which disable the insiders of the company by selling their shares for some specific time period, is referred to as a lock- up agreement.

The agreement is made in order to avoid the situation of excessive selling pressure for the first few months of trading.

From, the given scenario of the question,

GS Investment Bank adapted this method, to limit the officers from selling the shares into the market for some specific period of time.