Free Stock or Free Warrants ?

[alzeller]

I know the SEC is hot on free stock giveaways, but what about stock warrants?

Please advise,

 

[I AM ALWAYS LIABLE]

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by alzeller:
I know the SEC is hot on free stock giveaways, but what about stock warrants?

Please advise,<HR></BLOCKQUOTE>

My response:

A warrant is a form of stock option that entitles an investor to purchase a specified number of shares of company stock in the future at a price fixed by the warrant.
The price (called a warrant price or conversion price) represents the cost per share when the warrant is exercised, i.e., converted to shares of the underlying security. For instance, if the warrant price is $2, the holder of the warrant has the right to buy the specified number of shares of the stock at $2 per share even if it is selling at $15/share when the warrant is exercised. One can "exercise the warrant" by paying cash for the share price on the warrant or, if given with a loan, by canceling a portion of the debt equal to the warrant exercise price. When warrants are issued in connection with a loan, they are often called equity kickers to refer to their ability to give debt investors an opportunity to share in the company's capital appreciation.

Warrants are available for purchase by investors in private placements. They may be re-sold privately as well as exercised. When they are exercised, it usually results in restricted stock, and the holder is then subject to the usual insider trading regulations, short swing profit rule, and company policies.

May be exercised via either a cash or cashless transaction:
If exercised via a cash transaction and the stock received is restricted, the stock is subject to a brand-new restricted stock holding period that starts when the warrants are exercised.

If exercised via a cashless transaction and the stock received is restricted, the length of time you've held the warrants is considered towards meeting the restricted stock holding period.

If the underlying securities are already registered, the shares received may be resold publicly at any time, as long as any conditions agreed to with the Issuer are satisfied and you comply with the insider trading regulations, the Short Swing Profit Rule, and applicable company policies.

What are the holding period restrictions on warrants?
Warrants usually result in restricted stock when they are exercised, i.e., converted to shares. Usually these shares are then subject to the standard holding period requirement which starts at the exercise date. However, if the warrants are exercised in a cashless transaction, tacking applies, and the length of time you've held the warrants is considered towards meeting the holding period of the acquired shares. Assuming you are not an affiliate, if the shares received by the exercise of warrants already have been registered, they are not restricted and may be resold publicly at any time, as long as the contractual agreements with the issuer are satisfied. You also may be able to sell all or some of your warrants privately. Note: If you are an insider or affiliate, insider trading regulations, the short swing profit rule and appropriate company policies always apply. The period of time that must be observed (usually by the current owner) before restricted securities can be sold on the public market.
The SEC requires minimum holding periods to ensure that registration requirements of the Securities Act are not circumvented by people acting as stand-ins for the Issuer. The holding period also is intended to ensure that an investor is seriously interested in the long-term success of the company issuing the securities and has assumed full economic risks of his or her investment. Since the theory behind the one-year holding period is that the acquirer of restricted securities must bear the full economic risk for one year, the securities must have been both paid for and held for the one-year period before they can be sold pursuant to Rule 144. Also see Rule 144(d).

Restricted Stock:
Generally refers to stock purchased in a private placement directly from an issuer before the company is public. Restricted stock also may have been acquired through a corporate reorganization or acquisition, in return for services, or purchased from an original shareholder. Restricted stock frequently will have a legend printed on the back of the stock certificate(s) stating that the shares cannot be sold or disposed of without either registration under the Securities Act of 1933 or an exemption from such registration, such as meeting the requirements of Rule 144 or Rule 145.

IAAL



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[alzeller]

Can I advertise free stock warrants?