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.

BREAKING DOWN '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. Piggyback Registration Rights

    A form of registration rights that grants the investor the right ...
  2. Rights Offering

    An issue of rights to a company's existing shareholders that ...
  3. Rights

    A security giving stockholders entitlement to purchase new shares ...
  4. Small Corporate Offering Registration ...

    A form of corporate securities registration designed to reduce ...
  5. Letter Of Comment

    A letter from the Securities and Exchange Commission that is ...
  6. Private Company

    A company whose ownership is private. As a result, it does not ...
Related Articles
  1. Markets

    Understanding Rights Issues

    Not sure what to do if a company invites you to buy more shares at discount? Here are some of your options.
  2. Investing

    Why Companies Stay Private

    Many private companies prefer to stay private and find alternate sources of capital. Find out what firms have to gain by eschewing the windfall from a flashy IPO.
  3. Investing

    Advantages of Public Vs. Private Companies

    A privately held company is owned by its founder, management or a group of private investors.
  4. Investing

    Explaining Rights Offering

    A rights offering is an offer by a company to its existing shareholders of the right to buy additional shares in proportion to the number they already own.
  5. Managing Wealth

    How To Invest In Private Companies

    It can be tough to invest in a company that doesn't trade on an exchange, but there are also several advantages.
  6. Managing Wealth

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  7. Managing Wealth

    Valuing Private Companies

    You may be familiar with publicly-traded companies, but how much do you know about privately-held firms?
  8. Investing

    Stock Rights Issue

    Rights are offers that allow existing stockholders to buy additional shares at a predetermined price, for a set time period. Usually, the number of shares the investor can purchase are in proportion ...
  9. Investing

    What is a Private Company?

    A private company is any corporation that does not have shares publicly traded in the equity markets.
  10. Managing Wealth

    Investing In Stock Rights And Warrants

    Many companies choose to issue rights or warrants as an alternative means of generating capital to avoid dilution of existing share value.
RELATED FAQS
  1. How does piggyback registration work?

    Registration rights ensure that companies cooperate during the registration process through which investors register shares ... Read Answer >>
  2. Why would a company issue a rights offering?

    Understand more about a rights offering, and learn the most common reasons a company might have to issue a rights offering, ... Read Answer >>
  3. How are rights distributed in a rights offering?

    Learn about stock rights offerings that companies may make, and discover how the rights are distributed among the company's ... Read Answer >>
  4. What is a direct rights offering?

    Discover what a direct rights offering is, what it means for shareholders who receive the offering, and the reasons a company ... Read Answer >>
  5. How long is the validity period for a Series 63 exam if I have not been registered?

    Find out how registration begins using Series 63 results and how long scores are valid without registration. Learn more about ... Read Answer >>
  6. Can you trade securities before you pass the Series 63 exam?

    Find out more about state registration and Series 63 exam scores. Learn how long these scores are valid and how registration ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center