How does piggyback registration work?

By Richard Wilson AAA
A:

Registration rights ensure that companies cooperate during the registration process through which investors register shares for sale to the public following the initial public offering. Piggyback registration is a form of registration rights that allows investors to register stock when companies or other investors initiate registrations. In this way, "piggybacking" investors register shares only after other investors initiate the process.

Piggyback registration rights are considered inferior to demand registration rights for two reasons. First, investors cannot initiate the registration process. Investors who only have piggyback registration rights are unable to control the timing of registrations. Second, shares sold under piggyback rights are inferior. Thus, piggyback registration rights often are excluded from offerings, while shares under demand registration rights are favored.

Piggyback registration rights have one solid benefit, however. Holders often are allowed to participate in an infinite number of registrations without being subjected to the caps that apply to other registration rights.

(For more on this topic, read Understanding Rights Issues.)

This question was answered by Richard C. Wilson.

RELATED FAQS

  1. How is a penny stock created?

    Understand how penny stocks are issued and regulated, and learn how these sometimes rewarding but always risky investments ...
  2. In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an ...
  3. Why do share prices fall after a company has a secondary offering?

    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ...
  4. What is a company's worth, and who determines its stock price?

    A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market ...
RELATED TERMS
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or ...
  2. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  3. Muppet Bait

    Naive investors who are lured into buying hot stocks or securities ...
  4. At A Discount

    This specifically refers to stock that is sold for less than ...
  5. Aftermarket Report

    A summary of how shares of an initial public offering (IPO) performed ...
  6. Small Corporate Offering Registration - SCOR

    A form of corporate securities registration designed to reduce ...

You May Also Like

Related Articles
  1. Investing Basics

    How Does Alibaba Make Money? A Simple ...

  2. In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.
    Investing News

    5 IPOs That Broke The Markets In 2014

  3. Investing Basics

    Alibaba IPO: Why List In the U.S.?

  4. Despite a booming market, some IPOs crashed and burned. Sure, going public brings a flood of capital, but it can also expose a company to unpredictable market forces.
    Investing News

    IPO Stinkers: The Biggest IPO FAILS ...

  5. Investing News

    What is Alibaba?

Trading Center