Does Rule 144 apply to private companies?

Rule 144 does not apply to private transactions, including sales, gifts, estate distributions and pledges, but does apply to the purchaser, donee, beneficiary and pledgee, when they sell the stock into the public market.

Who does SEC Rule 144 apply to?

Rule 144 applies if you are: a non-affiliate shareholder who wants to sell their restricted securities. an affiliate of the issuing company who wants to sell their securities (whether they are restricted or “free trading”) into the public market.

Is a SPAC a shell company Rule 405?

See Securities Act Rule 405 and Exchange Act Rule 12b-2. However, any exceptions to the Commission’s shell company limitations designed for business combination related shell companies do not apply to SPACs and any shell company formed to facilitate a merger with a SPAC.

Does Rule 144 apply to SPACs?

For former shell companies, including SPACs, Rule 144 imposes additional requirements including that the company: (i) has ceased to be a “shell company” as defined in the rule, (ii) is an SEC reporting company, (iii) has filed all reports required to be filed with the SEC during the preceding 12 months; and (iv) has …

Why do companies go to SPAC?

Going public with a SPAC—pros Possibility of raising additional capital: SPAC sponsors will raise debt or PIPE (private investment in public equity) funding in addition to their original capital to not only fund the transaction but also to fuel growth for the combined company.

Who Must File Form 144?

Form 144 must be filed with the SEC by an affiliate as a notice of the proposed sale of securities when the amount to be sold under Rule 144 during any three-month period exceeds 5,000 shares or units or has an aggregate sales price in excess of $50,000.

Is a SPAC a business combination related shell company?

Special purpose acquisition companies (“SPACs”), commonly referred to as “blank check companies,” are public shell companies that use their initial public offering (“IPO”) proceeds in order to acquire private companies within a specific timeframe (this acquisition is commonly referred to as an “initial business …

What is the downside of a SPAC?

Going public with a SPAC—cons Shareholding dilution: SPAC sponsors usually own a 20 percent stake in the SPAC through founder shares or “promote,” as well as warrants to purchase more shares. Capital shortfall from potential redemption: Initial SPAC investors may redeem their shares.

When should I sell my SPAC?

A strategy often pursued by hedge funds is to sell the SPAC after the IPO and keep the warrant that could increase in value if the SPAC stock approaches or exceeds the strike price at which the warrant could be exercised for common stock shares of the SPAC.

Can a shell company resale securities under Rule 144?

Under the amendments, Rule 144 is not available for the resale of securities initially issued by a shell company (reporting or non-reporting) or a former shell company. These securities can be resold only through a resale registration statement, unless certain conditions are met.

When do I need to use Rule 144?

If the securities to be sold were initially issued by a shell company or a former shell company that has since ceased to be a shell company, Rule 144 can be used if:

When is Rule 144 general information for affiliates available?

For reporting companies, such information is deemed to be available only if the following conditions are satisfied: the company is, and has been for a period of at least 90 days immediately before the Rule 144 sale, subject to the reporting requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934;

When did SEC Rule 144 and 145 become effective?

The Commission eliminated this “presumptive underwriter” provision, except when the transaction involves a shell company. The amendments to Rules 144 and 145 are effective on February 15, 2008. What are the new Rule 144 holding periods for restricted securities?