144a is a law set up by the Securities & Exchange Commission (SEC). The rule limits when you can trade shares and stocks of a company where you're the owner, investor, or other insider.

According to the rule, if you're a high-flying insider and your company goes public, you might have to wait six months and then some before you can begin trading your stocks or shares.

Related or Semi-related Video

Finance: What is a holding period/144a?8 Views

00:00

Finance a la Shmoop. What is a holding period or a 144 a filing. Should sound

00:09

way less sexy. Well after you will make love, there should be

00:14

a holding period. Right? So we're talking about investing here, so it's all

00:20

different. All right here's the gist. Back in the day, the dark days, you know before

00:25

there was honest regulation of the securities industry, a whole lot of [man in bed with BRK share]

00:29

cheatin was going on. Fake schemes would offer shares to an

00:33

uneducated, unsophisticated public. With the sellers hoping to get rich

00:39

quick. The public would buy shares of a supposedly hot IPO. Only to have the

00:45

founders and funders of that fake or crappy company dump their

00:50

shares five minutes after the company was public. Leaving the outside investors,

00:54

holding the bag in the form of IPO shares that they paid eighteen bucks[people surrounding money chart]

00:59

each for. Well which we're now trading under a dollar. So today insiders, like

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founders and the early investors, are presumed to have a lot more knowledge of

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the company's operations, projections, performance and prospects, than the

01:14

general public. So the SEC Institute, of what is called the 144 a rule, which sets

01:20

out guidelines under which insiders can sell their shares. Meaning they can't [head banker]

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just dump all of them on the same day, you know five minutes after the IPO. Very

01:31

roughly, insiders must hold their shares at least six months and change after the

01:36

first day of official trading during an IPO. And they must limit the volume that,

01:42

well they're dumping. That is if insiders, own say, seventy percent of the

01:47

shares of a newly, publicly traded company. Well they can't just dump 80% of [garbage truck dumping garbage]

01:52

that seventy percent, you know that first week after the six months is over. Got it?

01:57

Well in most cases insiders seeking to get liquid, ie turn their shares into

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cash, so they can buy that home they've been longing for.

02:05

Well they hire an investment bank to gather together all the insider selling

02:09

group of shares. The bank then quietly markets them to investors

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who had shown interest during the company Roadshow. You know during the

02:17

IPO and then in an orderly fashion, the bank sells those shares, to you know,[conference money meeting]

02:22

interested parties. The goal here is to, not crash the stock price in the process.

02:29

You can imagine what would happen if a stock averaging 300,000 shares a day of

02:34

trading, suddenly had a supply of 50 million shares come for sale. Yeah way

02:40

more supply, modest demand not a good situation. But you know holding periods,

02:45

got to hold them six months. Fortunately there's always cuddling, we[man in bed with DPRP share]

02:50

like the cuddling.

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