Registration Right

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.



comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center