Get Ready: Dave & Buster's Lock-Up Period Is About To Expire

Shares of Dave & Buster's Entertainment, Inc. PLAY began trading on the Nasdaq exchange on October 10 after initially pricing 5.88 million shares in a range of $16 to $18 per share. The stock then gradually rose to 52-week highs of $31.22.

Investors should take note that the company's lock-up period is set to expire this coming Wednesday.

A lock-up period typically lasts 180 days from the initial public offering. During this time period, company insiders and majority holders are not permitted to sell any of their shares. Once the lock-up period ends, the vast majority of trading restrictions are removed.

Related Link: How Will The Lockup Expiration Affect Alibaba's Stock?

The Securities and Exchange Commission warns investors on its website that it is important to follow a company's lockup expiration date.

Why?

The stock price may drop in anticipation that locked up shares that previously weren't allowed to be touched will now be available for sale.

As an example, shares of Twitter Inc TWTR plummeted following the end of its lock-up period on May 6. The stock closed that day at $31.85, down nearly 18 percent on volume of more than 130 million shares -- nearly 10 times the daily average volume for the previous 50 days.

The plunge in Twitter merely serves as an example of what is possible when a company's lock-up period ends. It's certainly not indicative a similar reaction will be seen in shares of Dave & Buster's.