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. Registered Security

    1. The name given to securities whereby ownership is registered ...
  3. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  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. Alibaba's Top Competitors
    Investing News

    Alibaba's Top Competitors

  2. Analysis of Companies with high goodwill
    Investing Basics

    Analysis of Companies with high goodwill

  3. What Does The Dow Jones Industrial Average ...
    Investing Basics

    What Does The Dow Jones Industrial Average ...

  4. What are the differences between dilutive ...
    Investing

    What are the differences between dilutive ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center