You create an app that tracks people's adverb usage and gives them a little shock when they overuse them. (You distinctly hate when people grossly, aggressively drop unnecessary adverbs into sentences.) Your app draws a lot of investor interest. One fund, Grammar Champ LLC, gives you a $100,000 investment. In return, they get 25% of the company.
After a while, the people at Grammar Champ want you to take the company public. Things have been going well, and they've determined that an IPO is the best way for them to extract value from their investment. However...you don't want to. What's more, you still own 75% of the company, so you get the final say on what happens.
Except...when you sold the investment to Grammar Champ, you gave them registration rights. This stipulation gives the investor (even a minority investor) the right to force the firm to take the shares public. That way, Grammar Champ can sell the stock to the public and cash in on its investment.
After all, the end game of early investments often comes down to an initial public offering. People who put money into a speculative venture can use the IPO to unlock a return from their early stock purchase. But the decision to go public might be out of an investor's hands. If they only hold a minority position, they have to wait until the major investors are on board with the decision to sell stock to the public. However, if they negotiate a registration right, they can require the firm to list the shares on a public exchange, register them with the SEC, and conduct an IPO.
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Finance: What is shelf registration?3 Views
Finance a la shmoop what is shelf registration?
well there are mussels and oysters and clams...Oh wait, that would be shellfish [Seafood dishes appear]
registration but it's making me hungry and yeah the real definition of shelf
registration needs a little horseradish or something just to like you know wake [Woman sniffs horseradish while in bed]
you up specifically a shelf registration is a kind of public offering where banks
and other fiduciary fancy institutions can offer new securities in companies
without going through the myriad dance steps needed for a full-contact naked
IPO and usually a shelf registration applies in the situation where a company [Man discussing shelf registration in a club]
in a similar business might be offering the same product but in different
geographies like a company drilling oil pipelines in the southeast might file to [Oil pipeline appears]
raise money just from investors in that area while doing a similar offering in
the northwest in middle America and maybe even out of the country in this
situation the business dynamics are almost identical in each area because
like oil is oil right with the one exception of specific regional laws that [Wolves appear from woods]
may differ like you gotta be really careful about polluting the Everglades
in Florida and well, lakes in general and some
people care a lot about that and some people don't like people in the
northwest are a whole lot more sensitive to polluting arsenic on their moose then
are the kindly loving citizens of kamchatka in I think that's in eastern [Man appears with moose in Russia]
Russia in making this kind of shelf offering the filings are essentially in
piles on a shelf with a few pages changed for each flavor of filing you
know simplifies things a lot they are then sent out to the relevant investors
who then do their own assessments as to whether or not they want to buy in well [Woman investor looking at folder]
the investment system can come in the form of warrants, convertible bonds,
series of equities in various shapes and forms but companies appreciate the
ability to file shelf registrations because of the dramatic reduction in
paper cost lawyer fees and well, filing experiences where the auditors first
comment is you know turn your head and cough...stop polluting and you won't [Doctor asks patient to turn head and cough]
cough so much
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