A new rule goes into effect on February 15th that will change the Direct IPO and Secondary Offering market significantly. Rule 144 governs how long a shareholder remains restricted from selling shares when purchasing stock directly from a public company. The holding period used to be between 1-2 years and has now been reduced to only 6 months, and includes any 144 stock being issued BEFORE February 15th (see rule comments at end of this email).
Most small cap stocks and some mid to large cap stocks have been subjected to difficult conditions when raising money using PIPEs, Secondaries, SB-2 Filings, Shelf Registrations etc. The reason is that hedge funds short the company's stock prior to funding and severely damage the market price in order to cover the short in the PIPE offering at lower levels and then get a treasure chest of warrants for free. That game is going to end with this new rule change. BUYINS.NET has spent 11 years fighting manipulative short selling and naked shorting that often goes hand in hand with public companies doing financings (we all remember the toxic death spiral convertible debentures that put companies out of business).
BUYINS.NET will start issuing alerts on stocks that have the "Short Shield Seal of Approval". What this means is that the companies that are doing Direct IPOs or Secondaries are NOT using PIPEs or free trading share transactions that would guarantee that the stock is going to be shorted and the price is going to drop. Small cap stocks with lower floats and this seal of approval will be better protected from these vulture financings that cause dramatic price drops. On the contrary, the lack of borrowable shares along with no public financings, other than Rule 144 stock, will be green lights for investment. The opportunity for investors will be to participate in high growth small cap companies through Rule 144 financings and only have to hold the shares for 6 months. Here is the commentary on this important rule change:
The Securities and Exchange Commission published the final draft of changes it's making to Rules 144 and 145 of the Securities Act of 1933 on Dec. 6. The rule changes, which deal partly with requirements for holders of restricted stock, have been under discussion since last spring at the SEC and were closely watched by the PIPE market.
Only one surprise remained: The rule changes, including those shortening the required holding periods for restricted stock, are applicable to securities acquired before or after the effective date of the changes.
This means that if you've held restricted securities for six months, once the effective date hits you can sell them. The effective date is 60 days from the rule changes' publication in the Federal Register. The rule changes will reduce the required holding period to six months from one year for unregistered securities held by non-affiliates. The move is seen as likely to increase liquidity for investors and create more favorable terms for PIPE issuers. This allows investors holding securities prior to the rule change to still use the shortened holding period and is a significant advantage to investors in Rule 144 offerings.
BUYINS.NET will be updating you shortly as this rule change will bring many good trading opportunities.
Email our CEO, Tom Ronk, at tom@buyins.net if you are interested in learning more about getting allocations in pre-IPO or discounted Secondary Offerings that use this new shortened Rule 144 holding perioud.
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