Accounting Theory

Finance allah shmoop What is piggyback registration Okay okay So

you know what Piggyback rides are right These things yet

a boon for back surgeons chiropractors and acupuncturists all in

one goofy stupid move Well piggyback securities registration works kind

of the same way A given stock is about to

be registered ahead of an initial public offering Yeah i

po and the pee There is not for piggyback although

it would be cool if it wass a bunch of

investors invested in the company while it was private and

employees received common stock options as part of their compensation

Will maybe some employees bought out those options and now

own common shares So there's an amalgam of different flavors

of shares out there more or less representing the same

thing You have preferred stock purchased by investing investors like

they paid cash up front which will all convert to

common stock when the company officially floats or goes public

And you have stock options that are bought out by

actual common shares owned by employees But then you have

the company selling newly printed common shares to the public

in this offering like whatever dot com has one hundred

Million shares in total now it's going toe print twenty

million new shares to sell to the public Thank you

xerox machine for running in the wee hours there So

those twenty million shares will of course be registered because

they're being sold to the public and their myriad rules

and regulations about selling things to mon pa kettle public

But then what about the hundred million sitting outside of

those twenty million that will be registered through myriad lawyers

with endless nighttime meetings in a lot of talk and

coffee Well what happens to those other hundred million Well

they essentially get piggyback registration writes on top of those

twenty million shares being registered they get them so that

they're all treated equally more or less as if they

were also registered along with those twenty million that went

through the painful aipo registration process where the lawyers you

know ask management to turn their head and cough and

do other invasive things Then all those shares once they've

been piggybacked and registered together are freely and readily tradable

when the proper windows opened for them to be traded

that is in most cases insiders can't sell their shares

On an open stock market under the rule one forty

four eight system which means that they have to wait

six months and change before they can sell them But

then they can sell them And when they can under

piggyback registration writes those shares would then be treated as

if they too were just normal Registered shares like the

ones that went out in the aipo courtesy of the

xerox machine And so the combined entity all looks about 00:02:47.298 --> [endTime] the same two way You know bear market