Registration Right

AAA

DEFINITION of 'Registration Right'

A right which entitles an investor who owns restricted stock the ability to require a company to list the shares publicly so that the investor can sell them. Registration rights, if exercised, can force a privately-held company to become a publicly-traded company. These rights are usually assigned when a private company issues shares in order to raise money.

INVESTOPEDIA EXPLAINS 'Registration Right'

Registration rights can help investors holding private shares gain access to the broader market in order to sell shares, but can have significant impacts on the company. The private company would have to go through the IPO filing process, which is likely to be expensive. Employees will have to dedicate time to organizing material required for filing instead of focusing on day-to-day business operations. The IPO might also wind up reaching the market at an inopportune time, which could lead to the share price being lower than desired.

Rights are typically negotiated when privately held shares are purchased. Typical negotiation points include the number of rights allotted to the investor, with management likely preferring fewer rights due to IPO expenses. The company may prevent registration rights from being enacted for several years, especially if the company is in the early stages of raising funds. This prevents the company from being pushed public before it has operated long enough to be stable. It is in the company’s interest to limit the effect of the registration right.

RELATED TERMS
  1. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  2. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  3. Registered Security

    1. The name given to securities whereby ownership is registered ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  5. Registered Holder

    Shareholders who hold their shares directly with a company.
  6. Acquisition

    A corporate action in which a company buys most, if not all, ...
Related Articles
  1. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  2. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.
  3. Bonds & Fixed Income

    Why are bond yields calculated in terms of basis points?

    Find out why financial analysts and publications track and quote bond yields in basis points, or bps, rather than simply stating percentages.
  4. Investing Basics

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  5. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...
  6. Investing Basics

    What is the difference between a company's outstanding shares and its float?

    Understanding share counts, including outstanding shares relative to float, is an integral part of determining whether or not to invest in a particular company.
  7. Investing Basics

    What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various terms is at the foundation.
  8. Options & Futures

    What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including the uptick rule.
  9. Fundamental Analysis

    What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate of return measurement.
  10. Investing Basics

    Why Do Penny Stocks Fail?

    Penny stocks are speculative and highly risky investments. Lack of government and stock exchange oversight and general information leaves penny stock investors open to sudden losses.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center