Piggyback Registration Rights

Exploring Piggyback Registration Rights: A Comprehensive Guide

Understanding Piggyback Registration Rights

Overview of Registration Rights:

Piggyback registration rights provide investors with the opportunity to register their unregistered stock during a public offering initiated by either the company or another investor. Unlike demand registration rights, holders of piggyback rights cannot initiate the registration process themselves.

Exclusion from Registrations:

While piggyback registration rights are often viewed as inferior to demand registration rights, they still offer investors a means to participate in multiple registrations. However, they may be excluded from certain registrations, particularly if the underwriter determines market limitations.

Negotiated Provisions:

Investors with piggyback registration rights may negotiate certain provisions, such as the right to retain a minimum percentage of shares in an offering or prioritize their shares over those of other investors. Founders and management often seek piggyback rights to facilitate orderly share sales.

Demand Registration vs. Piggyback Registration

Distinction in Rights:

Unlike demand registration, where shareholders can compel the company to undertake an IPO, piggyback registration rights rely on the demand initiated by other investors. This distinction influences the timing and frequency of registration exercises.

Influence on Company Management:

Holders of piggyback registration rights may exert significant influence over the timing and execution of registrations, potentially impacting company management decisions. Additionally, piggyback rights are exercised more frequently due to their cost-effectiveness in ongoing registration processes.