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Have you heard the term “ROFR” (pronounced “Roafer”)? This term is well known by professional investors.
ROFR means Right of First Refusal. We will do a deep dive on ROFRs in this post.
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This post is a continuation of the post “Preferred Stock Financings: Registration Rights Part 1.”
In the prior post, we discussed the registration process, which enables the company and/or existing stockholders to sell shares to the public on a stock exchange, such as the New York Stock Exchange (“NYSE”) or NASDAQ. We discussed S-1 registration statements and S-3 registration statements, which are the primary ways for the company to sell stock to the public. In this post, we explore “demand” registration rights and “piggyback” registration rights, which are rights held by the preferred stockholders in order to be able to register their shares so they can be sold in the public markets. There are two key events that occur for an investor in a private company: The purchase of the stock and the exit (an “exit” is the sale or exchange of the stock for cash or publicly traded stock). The primary exits are when a company is sold and the investor receives cash for its stock, and when the investor sells their shares into the public market as part of a registered offering, such as an IPO.
“Registration rights” are the rights that preferred stock investors obtain to allow them to sell their stock in a registered offering. There’s a lot to discuss here, so buckle up and let’s get going. I am pleased to be moderating a panel at the Carmo Middle Market Private Equity Web Conference on February 9-10, 2021. I will be moderating the panel "Consumer & Business Services: A Conversation on Value. The link to the conference is here: https://www.carmocompanies.com/middle-market-private-equity-web-meeting
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All original works on this site are © Allen J. Latta. All rights reserved. Neither this website nor any portion thereof may be reproduced or used in any manner whatsoever without the express prior written permission of Allen J. Latta. LP Corner® is a registered trademark of Campton Private Equity Advisors. Used with permission. DISCLAIMER: Readers of this Blog are not to construe it as investment, legal, accounting or tax advice, and it is not intended to provide the basis for the evaluation of any investment. Readers should consult with their own investment, legal, accounting, tax and other advisors to the determine the benefits and risks of any investment.
Private equity investments involve significant risks, including the loss of the entire investment. This Blog does not constitute an offer to sell or the solicitation of an offer to buy any security. |