Piggyback Registration Definition

Piggyback Registration Definition




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Every company on some day or the other wakes up to go public. That’s when they issue an IPO. In this process, they issue new shares of their company to the general public. The ones who buy the first or fresh issue of their shares become a shareholder of that company. They’ll possess certain rights in the company like fair share of profits, voting rights, etc. Piggyback Registration is a part of the IPO process in the stock market trading. Let’s walk you through the definition and its functionality in the real world with an example. 

What is Piggyback Registration?

The Piggyback registration process in the stock market trading is the securities held with the top-level management that are sold via an IPO. The top hierarchy includes founders of the company, early investors, and other insider employees of the company who were a part of the securities selling deal at the time of an IPO. The sale of existing securities takes place hand in hand along with the public offering. 

Piggyback registration in stock market trading is considered to be inferior form when compared to demand registration. Because the piggyback registration holders cannot demand for an IPO nor register themselves. Piggy holders have to wait for the IPO to happen until the demand rights holders propel the company to go public. Underwriters don’t give much priority to piggyback registration as it doesn’t have apt control over the timing in the stock market trading world. 

The inclusion of piggyback registration rights can be eliminated from the IPO process but it would be expensive if you go the other way round, meaning, selling those shares individually. On the flip side of the stock market trading, the piggyback registration investors have an added advantage over demand registration investors. Because the former gets the opportunity to enjoy unlimited registrations while the latter do not. In addition to that, the cost attached to piggyback shares will be taken care of by the company itself instead of investors paying the price.

How Does Piggyback Registration Work?

Piggyback registration rights holders don’t have the leeway to register shares by themselves like demand registration holders in the stock market trading. So, the former investors have to piggyback on the latter investors to get their shares registered when the company goes public. During this phase, some investors opt to sell their shares just immediately after the company enters the public space.

Investors try to persuade the underwriter of that respective company to add their shares into the pool of new issue shares. If the underwriter gives a green signal, then these shares are considered as a piggyback registration and will be broadcast in the prospectus of the company. The piggyback registration in stock market trading is an inimitable strategy to give room to new investors who are looking for long-term growth of the company.

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