IPO firms manage earnings around their initial public offering and lockup expiration to raise capital and allow pre-IPO shareholders to exit. They do not manipulate earnings before the IPO, but show increased abnormal accruals before and during the lockup expiration. These accruals are more common in less scrutinized firms and those with high selling by pre-IPO shareholders. The abnormal accruals eventually reverse, contributing to long-term underperformance of IPO firms.