Forward contract

Worked example

A worked example of a forward priced ahead of a lock-up expiry (illustrative figures):

1. A buyer and seller want to transact today, but the seller's shares are inside a 6-month post-tender lock-up and can't legally transfer yet. They agree on a forward contract: $15/share for 5,000 shares, cash to change hands and title to transfer once the lock-up expires.
2. Six months later, the company's next primary round prices at $20/share. The buyer still only pays the agreed $15/share — capturing a $5/share unrealized gain (5,000 × $5 = $25,000) purely from the price move over the forward's term.
3. The risk sits on the other side too: if the company runs into trouble in the interim, or simply refuses to process the eventual transfer (some companies' agreements prohibit forwards outright), the buyer can be left holding a contractual claim with no actual shares behind it.
4. Forwards let deals happen around timing restrictions that would otherwise block them entirely, but they substitute one risk (illiquidity) for another (counterparty and company-cooperation risk) — worth pricing explicitly, not assuming away.