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. What's a Marketable Security?
    Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  2. Stock Analysis

    Buyinb Facebook Stock, A Beginner's Guide

    This straightforward guide helps the novice investor feel more adept at buying a stock, such as Facebook (FB).
  3. Trading Strategies

    How do technical analysts interpret the Average Directional Index (ADI)?

    Learn what the average directional index is and why technical analysts look towards ADX indicators to measure the strength of price trends.
  4. Investing News

    Alibaba's Top Competitors

    A look at Alibaba’s top competitors to understand perceived and real competitive threats to the Chinese ecommerce giant.
  5. Investing Basics

    Analysis of Companies with high goodwill

    High goodwill as a percentage of market cap can actually be a big red flag--it potentially means the company botched a major acquisition.
  6. Investing Basics

    What Does The Dow Jones Industrial Average (DJIA) Quote Represent?

    “The Dow” is regarded as the “pulse of the stock market,” as it is one of the most quoted and followed stock market indices by investors, market professionals and media.
  7. Investing

    What are the differences between dilutive securities and antidilutive securities?

    Learn how investors and accountants apply the terms "dilutive" and "antidilutive" to securities or the exercise of security mechanisms.
  8. The Nikkei index is synonymous with Japan's economy, the third-largest in the world. Here's the easiest way to take a stake.
    Mutual Funds & ETFs

    How To Invest In The Nikkei 225

    The Nikkei index is synonymous with Japan's economy, the third-largest in the world. Here's the easiest way to take a stake.
  9. If you want to keep your finger on the pulse of the Japanese economy and stock market pay attention to the bellwether Nikkei 225.
    Investing Basics

    A Guide To Japan’s Nikkei 225 Index

    If you want to keep your finger on the pulse of the Japanese economy and stock market pay attention to the bellwether Nikkei 225.
  10. Investing Basics

    Investor, Know Thyself: Choose A Stock Category Based On Your Risk Tolerance

    Choosing the right investment isn't just about choosing the right investment. It also requires that you intimiately understand your own risk tolerance.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center