Capital Markets

New Trading Network for Restricted Stock

In addition to compensation arrangements, where the use of restricted stock has blossomed thanks to new rules on expensing stock options, it is als...
Stephen TaubSeptember 28, 2005

Restricted stock, which has become an increasingly common alternative to stock-option compensation, will soon be traded on its own secondary market, reported The New York Times.

Restricted Stock Partners has launched a trading network for these securities, which is issued by companies in private, unregistered sales. In addition to compensation arrangements — where the use of restricted stock has blossomed thanks to new rules on expensing stock options — the Times observed that it is also issued in connection with private investments in public entities (PIPEs), with mergers, and with reorganizations. The total market could reportedly be worth more than $1.2 trillion.

“It’s the largest asset class without a developed secondary market,” Barry Silbert, founder and chief executive officer of Restricted Stock Partner, told the Times. Other executives cited by the paper, however, suggested that the network was not yet necessary or that the market was insufficiently liquid.

The trading network will enable sellers to offer their securities to multiple buyers through competitive bidding, explained the newspaper, while maintaining the private-transaction regulatory framework required by the Securities and Exchange Commission.

Initially, Restricted Stock Partners reportedly plans to focus on stock issued by small to midsize companies. So far, the company claims to have signed up 125 members.