Piggyback Registration Definition
The process of Piggyback registration in business takes place when a company or an individual (underwriter) allows the sale existing organizational shares in conjunction with a novel public offering.
An underwriter allows offering a new issue of stock in conjunction with old issued shares. The process of registration requires the permission of concerned underwriter. It is to note that piggyback registration is a different process from piggybacking.
A Little More on What is Piggyback Registration
The piggyback registration process binds an underwriter (an individual persona or a company) to sign off on the form to begin the process. All types of arrangements are mentioned in a new issue that produces all the information of sellers who sell private shares. Piggyback registration is also known as consolidating and it permits joint ventures to take part in the first public offering.
Piggyback registration is initiated in a typical manner as it allows an underwriter to make a reduction in the number of shares of an investor during the due process of offering. Most often these rights provisions permit underwriters to wholly eliminate the role of investors as they are known as selling shareholders during the first public offering. In subsequent offerings (following time or order) a guarantee is issued to investors that their share in the offering will not decrease from 25 to 30 percent.
The other provision stands as a priority level concerned with an investor’s shares that become the part of an offering. For instance, a venture fund sets the terms and condition for the priority related to shares on the basis of permission from the underwriter. These negotiated priorities are registered in a registration form initiated by the company. Due to similar reasons, the management and founders of an organization are allowed to make negotiation if hey hold piggyback registration rights.
Piggyback Registration Rights vs Demand Registration Rights
There is a great difference between PRR (Piggyback Registration Rights) and DRR known as Demand Registration Rights. The role of PRR is believed as inferior to Demand Registration Rights due to two primary reasons. The first reason indicates that investors are not allowed to begin the registration process. Even those investors who hold piggyback registration rights have no control over the timing. The second reason is concerned with sold shares (under piggyback) status as they are considered inferior. These are some of the reasons that traders exclude piggyback registration rights from offerings. In contrast, shares that are favored, come under (DDR) demand registration rights.
Demand registration rights (DRR) grant investors certain rights or powers to demand an organization for the registration of its shares to sell them to the public. It is because investors are the actual owners of these shares. The registration must take place even the organization does not consider issuing securities in favor of the public within the given time. There is one confirmed benefit with regard to holding piggyback registration rights; holders can take part in as many registrations as they want without any restrictions (caps). However, this is not the case with other registration rights. Piggyback rights are used on a regular basis compared with demand registration rights. It is to note that adding shares that are associated with piggyback registration rights are low in price in terms of nominal cost for continuing registration process.
References for Piggyback Registration
Academic Research on Piggyback Registration
An introduction to registration rights, Ostrognai, A. (2001).International Financial Law Review, 44. The following research examines the introduction process with regard to registration rights. The research comprehensively explores the role of piggyback rights in the context of issuing new offering. The research presents a detailed account of financial activities related to piggyback rights.
Key Considerations in Drafting a Registration Rights Agreement from the Company’s Perspective, Jacob, V. F., Gelfond, S. H., Levitt, M. A., & Kanarek, D. A. (2008). REV. SEC. & COMMODITIES REG., 41, 113-118. The study addresses various organizational perspectives in relation to finalizing registration rights for agreement purposes between investors, business organization and shareholders. The study sheds light on certain key considerations that are essential to draft any such agreement.
Institutional Investors, Registration Rights, and the Specter of Liability Under Section 11 of the Securities Act of 1933, O’Hare, J. (1996). Wis. L. Rev., 217. This review paper examines the 1933 Act of US trading that defines the legal framework mechanism for institutional investors and how registration rights can be achieved. The paper examines the use of Section 11 of the securities in relation to liabilities and registration rights.
Can emergency cash transfers ‘piggyback‘on existing social protection programmes, Slater, R., Bailey, S., & Harvey, P. (2015). This study mentions the role of certain factors or actors related to humanitarian as well as social protection sectors in the context of using present social protection plans. The writer examines if ‘piggyback’ can be used as an emergency response for investor protection purposes. The writer examines the results and impact of using ‘piggybacking’ on the present continuous system in relation to its use in low-income countries.
Corporate venture capital contracts, Cumming, D. J. (2006). The writer states the significance of using a certain dataset of securities that are used by venture capitalists at various stages in Canada and in the United States of America. A total of 13 years period ranging from 1991 to 2004 has been focused for data collection purposes. The results indicate that Canadian limited partnership uses common equity along with other convertible securities rather opting for Canadian corporate VCs. These VCs also use non-convertible debt. The research finds out the presence of similar types of corporate VC investments in European markets.
An Alternative Paradigm for Valuing Breach of Registration Rights and Loss of Liquidity, Barondes, R. D. R. (2004). U. Rich. L. Rev., 39, 627. This article presents an alternative model that can be used to evaluate any breach or misconduct of registration rights. The writer has a strong opinion that by using the alternative model it is possible to perceive any loss of liquidity.
CrowdRecruiter: selecting participants for piggyback crowdsensing under probabilistic coverage constraint, Zhang, D., Xiong, H., Wang, L., & Chen, G. (2014, September). International Joint Conference on Pervasive and Ubiquitous Computing (pp. 703-714). ACM. In this research paper, the writer presents a new participant selection model which is known as CrowdRecruiter. It is used in relation to mobile crowdsnsing. This piggyback crowdsensing framework helps to decrease the reducing incentive payments. This process involves only a fewer number of participants to carry out this task. CrowdRecruiter initially indicates the call along with coverage probability against each mobile user. It is based on the evaluations of historical records.
Preferred Stock Terms Investors Love and Companies Hate (Part 1 with Form), Ewing, E. S. (2001). Prac. Law., 47, 31. The writer throws light on a model which is called Preferred Stock Terms. This model helps the organization to resolve issues with investors. The study shows that the preferences of investors vary; hence, the organization needs a negotiable mechanism to resolve issues.
Piggyback Registration, Civan, A. (2008). Encyclopedia of Alternative Investments, 358. The study evaluates the complete mechanism for Piggyback registration process in the context of investor and company issues. The study highlights how these registration rights work according to business processes.
Registration Taxes on Piggyback Trailers, Nelson Jr, M. E. (1965). Ann. Rep.: Sec. Pub. Util. L., 85. The research has been carried out to explain the role of registration taxes in relation to piggyback Trailers as most of the trade in the US takes place using road transportation. The increasing taxes are damaging business operations and they need to be revised.
The Management Team at Acquisition: Negotiating the Deal: Management must navigate a number of issues to maximize the value of its equity investments during …, Bernstein, A. J., & Lagasse, D. R. (2008). Compensation & Benefits Review, 40(4), 47-54. In this research, the author describes the importance of the management team during acquisition processes. The research further explores management capabilities for negotiating a deal and proposes a mechanism of how management can move forward to minimize certain issues that are problematic for equity investment.
Preparation for the Initial Public Offering, Aiello, J. A., Forlenza, P. D., Colella, P. T., & Lally, G. P. (2000). NJ Law., 17. The study highlights a roadmap of how an organization can prepare to make an initial public offering. Business activities in large US markets attract investors and companies to earn more profits by selling equity. The companies earned a huge sum in 1994 as an estimated 66.5 billion on public equity. The equity markets are especially receptive to any offerings made by organizations doing business in technology products and life sciences.