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.

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