The IPO market is back and with it is publicly traded stock.  We’re seeing a significant uptick in the number of deals we do involving stock as part of the payment. Taking on public stock in a transaction does not always mean that you can immediately liquidate it. Stock must be registered by the company before it can be sold on a public exchange.

Companies can complete a shelf registration, in which they essentially register stock to put on the shelf for a time, then issue it as a fully registered stock when needed. More likely, your stock will be unregistered, leaving you with the option of selling it in a private 144A placement to an accredited investor at a discount to the market, and with stiff fees.

Alternatively, you can rely on the issuer to register the stock after you get it. If you take unregistered stock, you should insist on either piggyback registration rights – which requires the issuer to register your shares when they next register any shares – or that they file to register your shares, because the issuer must remain in compliance with SEC regulations that may bar them from registering shares during a certain period. It can’t guarantee when your stock will be registered and tradable.



Be sure to keep these options in mind when structuring the sale of your company to avoid any liquidation holdups.

This blog series will continue with, “Managing potential dissident shareholders” – watch for it here.