Secondary market for Buying and Selling Restricted Securities (Section 144A Exemption and 4(1-1/2) Exemption) - Registered and Unregistered Stock, Affiliate and Control Stock, Convertible Securities, Registered Warrants, Unregistered Warrants, Block Trades and Portfolios of Securities

Restricted Securities

Market Description

SecondMarket's Restricted Securities Market facilitates transactions primarily in restricted securities in illiquid public stocks. Restricted securities include restricted stock, warrants, debt, and other convertible securities that are generally acquired from public companies in transactions that are not registered with the SEC or issued to corporate advisors as compensation for services rendered. They can also be registered with the SEC, but held by a "control" or "affiliate" person amounting to as much as 50% or more of the securities in some public companies. As the name implies, restricted securities cannot be freely traded and are, therefore, illiquid. However, through a privately negotiated sale -- a Section 4(1-1/2) Exemption -- accredited individuals and qualified institutions are able to purchase restricted securities. SecondMarket has been completing restricted securities transactions since 2004. SecondMarket has also recently opened its marketplace to block positions in publicly traded companies. Historically, holders wishing to sell large block positions have released the shares into the public marketplace over a period of weeks or months, during which the price typically declines as the market reacts to the large volume of shares being sold. Through SecondMarket, buyers and sellers can engage in private transactions that enable sellers to trade their shares in a short period of time without public disclosures that can cause intra-trade price declines. While buyers can gain access to closely held securities that may otherwise be difficult to source.

Feb 4 2010

Risk Mitigation Could Lead To A Better PIPEline In 2010 — blogs.wsj.com

PIPE volume for 2009 totaled $36.7 billion, down from $118.6 billion in 2008, a decline influenced by hedge fund redemptions and the aftermath of the stock market collapse
The number of registered direct offerings increased from 111 in 2008 to 267 in 2009, stemming from risk aversion and an SEC rule change that made it easier for companies to register stock via an S-3 filing, according to PrivateRaise
2010 may see a revival in the PIPE market, as small-cap stock brothers have risen and money has begun to flow back into hedge funds
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Jan 28 2010

S.E.C. Cites 2 Funds for Short-Sale Violations — www.nytimes.com

The SEC announced on Tuesday two enforcement actions against hedge funds that had profited by shorting stocks just before they bought shares of the same stock at a discount in a public offering
The practice, called “shorting into the deal” allows the investor to lock in a guaranteed profit
The hedge funds had attempted to exploit the exception to the SEC rule banning the practice, which allows such trading in separate accounts

Jan 27 2010

Porsche Is Sued for $1 Billion by VW Short Sellers — www.bloomberg.com

Porsche has been sued by short sellers of Volkswagen AG stock who claim that Porsche secretly cornered the market in Volkswagen’s shares and later caused them more than $1 billion in losses
The short sellers claim that Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen and by using manipulative trades to hide its stock positions