Assimilation

  

Categories: IPO, Stocks, Trading

You decided to take your company, Delila’s Delightful Dill Pickles, public. Ursula’s Underwriting has purchased 200 shares. A year later, all of these shares have been snatched up in the market. That’s assimilation. All shares have been unsaddled from the underwriter, and are in the hands of the people.

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Finance: What is a Lock Up Agreement?3 Views

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Finance allah shmoop what is ah lock up agreement Okay

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You invested your dough in the original round of this

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venture capital like investment or you're a founder whose entire

00:15

network lives in the form of stock in your hot

00:18

little new company Dot com you sold a portion of

00:21

it to the public earlier in your aipo raising a

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big fat pot of money for you to go spend

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opening new sales channels in china Uzbekistanian and somalia Yeah

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good luck with that So now you're desperate to sell

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some percentage of your holdings You've been dying to buy

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that new tesla suv with the gullwing doors and you

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know self make upping feature But you can't buy it

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Why Well because your locked up and it's nothing prunes

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will solve You signed a contractual agreement when you did

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the original handshake with the investment bankers who were taking

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you public You agreed that you would follow what are

00:59

called the one forty four a laws which restrict insiders

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from selling any shares until to quarters and change have

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fast during which a company is newly public Well why

01:11

do these laws even exist Well because a bunch of

01:13

scummy city slickers screwed over a bunch of uneducated farmers

01:17

in a bygone era such that the government had to

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step in and make everyone play fair and square like

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they dumped their shares the minute the company was public

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on unsuspecting farmers who paid eighty seven dollars share only

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to watch the stock trade down to eighty seven cents

01:32

a share two years later or even less Yeah that

01:35

happened right Well the general idea here is that if

01:38

a company can show professionally audited public Numbers 4:6 months

01:43

and change of being a public company well then they

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wouldn't have been able to hide something deep dark fraud

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like elements about their business that it was all kind

01:52

of a shell game against those poor farmers Well everyone

01:55

would be playing then on the same level playing field

01:58

and it would be fair upon public notice for insiders

02:02

to sell some limited percentage of their total holdings and

02:06

get liquid well in practice all kinds of restrictions exist

02:10

against freeform insider selling so a maximum total percentage owned

02:15

per month recorder per year is out there their maximum

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ceilings against which total volume can't be certain passed in

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a given day like if a million shares trade in

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a day you can't sell more than five percent or

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fifty thousand shares in a day And a bunch of

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other restrictions exist that are designed to mitigate the spread

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between information held by insiders and information held by outsiders 00:02:40.645 --> [endTime] Yeah other outsiders

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