What is Piggyback Registration?

Piggyback registration is an arrangement under which certain existing securities issued by a business are included in a new offering of stock to the public. By doing so, the holders of the existing securities can sell their shares to other investors. This allows early-stage investors to exit the business, allowing new investors to take ownership positions in the firm. This can be useful for the business, which wants to attract a new set of investors who are interested in investing in the firm for an extended period of time.

The prospectus associated with the sale of shares must state the nature of the shares being included in the offering under this arrangement, as well as the names of the people selling their shares. Piggyback registration rights are typically included in a private placement, so that investors have some hope of eventually being able to sell their shares. From the investor perspective, the main problem with a piggyback registration is that they cannot demand it; instead, their shares will only be included if the business chooses to make a new offering of stock to the public. Furthermore, the underwriter may not allow the piggyback registration if does not believe there is sufficient demand in the marketplace to absorb these extra shares.