July 3, 2011 at 22:59IPO for dummies. Part VII: About Insider
The beginning and table of contents see in the first part .
So what about insider?
If you run a company, you definitely have more information than any minority shareholder who bought its shares on the stock exchange via the Internet.
But, if you take advantage of this by trading stocks, it will not be fair to ordinary minority buyers. Agree, if all the property of your company consists of an oil tanker, and you were first informed that it sank, having encountered an iceberg in the Atlantic, then ... you rush to the stock exchange to sell your shares and stay with the money. But the company's shareholders, who learn about the sunken tanker in a couple of days from the CNN report, will be left with a bunch of stocks instantly cheaper to the level of wrappers. Ugly, right?
Therefore, from the moment your company’s shares begin to be traded on the stock exchange, a lot of restrictions will be imposed on many actions with them performed by company executives, key employees or other people with access to important internal business information.
Of course, you, as the founder of the company, can put part of your shares on IPO. This is still normal, quite honestly. But immediately after the IPO they will not be able to sell them. Not only you, but any owner of large blocks of shares (who received them before the IPO - early angel investors, etc.) in general. Those whose shares were not put up for IPO are forbidden to sell them for a certain period after the opening of trading. This is called a lock-up (or lock-in, or lock-out, or maybe lock-some-another-adverb) period, and believe me, this is not 2-3 hours. More likely from 3 to 6 months. Before the IPO, the whole process was carefully calculated, but since in reality not all the company's shares are listed on the IPO, but about 20%, so 80% remains on hand, and the sale of a large volume can seriously undermine the market. History tells you that after the end of the lock-up, stock quotes fall on average by a few percent. Have you seen how money flows through your fingers? Then imagine how, after the start of trading on the stock exchange, stocks fall in price below the subscription price. And put yourself in the place of the owners of the shares that received them before the IPO - they are not allowed to sell shares during the lock-in.
So take heart, Lamborghini Gallardo does not shine on money from the sale of shares immediately after an IPO, unless you put your shares directly on the IPO at a "subscription" price, which is likely lower than that which will be determined on the exchange at the start of trading. And you do not need to take Lambo “to the company” in the “hospitality expenses” section - large investors will be unpleasantly surprised by the irrational spending of the budget. And even if you are not just a leader, but also the owner of a non-blocking block of shares, do not think that this will prevent the majority of shareholders at the general meeting of shareholders from depriving you, the Founder, Old-Timer and the Person of the Company, of a leading position. Shares, however, will be left to you, they will not be expelled from shareholders, do not be afraid. And do not be impudent at all, Lexus will be enough to get to Auchan on lease.
And still I do not understand: how does the concept of “insider” fit in with the ownership of shares by employees?
Yes, a known issue.
It seems to many that the concept of insider information is something cinematic when a company employee in a worn suit and dark glasses secretly tells the young trader the secret about the upcoming merger-acquisition-purchase-sale or some other event in the company that will greatly affect per stock price. And the trader, as if at random, buys these shares himself and capitalizes on growth. Such an implementation of insider by its semantic load is akin to stealing an ATM directly from the bank wall, and they are trying to fight this manifestation of insider.
Obviously, the employees of any company (and especially the management) themselves have much more internal information (and much more often) than can be shown in any feature film.
No matter how anti-etymological this may sound, not all “internal” information, even constituting a trade secret, is insider information. For exchanges, only that information is important, which can significantly affect stock exchange rates. Let's say this month a second gold mining machine was put in a key lead-distillation workshop - this is an event from the category of those after which people will want to buy your shares, because they will probably go up in price. And if the director’s secretary was replaced with an old Acer laptop with a glamorous iMac in strasses, the exchange’s reaction will be cleaned up in a couple of minutes spent by the only financial analyst looking at the secretary’s photo and thinking, her third or fourth size.
In addition, insider information is not only the meaning of information, but also its time. Knowing the caretaker of a lead distillation workshop about installing a second machine is insider until the company issued a press release about it. Once information has become publicly available, it can no longer be considered an insider.
But such information is generally an insider, regardless of who will use this information. If the director wants to use this information for the mercenary purposes during the period between the transaction to purchase a second gold mining machine, this is an insider transaction, his candlestick. If the watchman is still an insider deal. The director’s wife (or the watchman’s wife) is also an insider deal! Even if at the time when the director of the largest lead distillation plant in Russia was riding in a tight minibus and discussing a machine that arrived by mobile phone with his deputy, and the grandmother standing on the director’s foot heard this, it’s also an insider for her (in fact, the latter case is enough controversial, because sometimes it is believed that the degree of importance of information should correlate with the degree of its reliability - otherwise you never know, maybe in the minibus chatted a nut who escaped from Kashchenko). And if it turns out that someone who owned this information (or even just had access to it) made a deal and made a profit ...
It remains to be hoped that the severity of laws (as well as the mandatory implementation of them) is different in different countries, and if our FFMS is still inconsiderate and merciful, then the SEC in the USA are generally animals,they do not even give them weapons .
It seems clear with the insider. But still ... what, it’s a pity to them if the director quietly buys shares on the stock exchange, knowing that a second machine will appear soon? What is the harm of insider?
Everything is simple. Who is the main person on the exchange, whom everyone loves, cares, cherishes and cherishes? (Little Vovochka, you said " puppeteer? Get out of class!) A shareholder, especially a minority shareholder (who said, “Would Navalny hear you?” Little Vovochka, again, you? Close the door and don’t look into the classroom!) What happens when the insider information director buys shares? He will make money. At the expense of whom? And at the expense of these most honest shareholders, those from whom he bought shares, and to whom he will sell them (later). One shareholder earned at the expense of others, possessing secret information that they did not own. Well, how to peep at other people's cards in poker. What kind of peeping cards is it customary to do? Candle holder!
And if the director (or another leader), and not just some ordinary employee, is hooligan, the food is missing. He is an ordinary employee (even if he has stocks!), And his main duty, his duty to his employer-business owners, is to make a profit in the company. That is to shareholders. And here he, on the contrary, profits at their expense ...
So in the end, when does the management and employees trade stocks so that their trading is not regarded as using insider information?
Hmm, I thought it was obvious. There is one point: insider information is information that can affect stock prices. Point two: insider information is information that has not yet become public.
It is generally believed that it’s quite safe to rake the shares of your beloved company exactly after the publication of the official financial report. Well, if you don’t know any significant secret that is not reflected in the financial report.
And also, depending on the jurisdiction, if the management or key persons of the company sell shares, they may need to report this to the commission / market regulator. And they will publish this information officially, so that there is absolutely no risk of “using an administrative resource”.
And then you will have both the yellow Gallardo and the thin Tamarka from the fifth floor in the passenger seat.
I was already disappointed in the hope of cutting down the dough at the startup. I will do it, so be it, for the sake of lowering the entropy of the universe. I will distribute the shares to employees. How to do it competently?
But about this in the next part. :)
In the next part : about motivation.
So what about insider?
If you run a company, you definitely have more information than any minority shareholder who bought its shares on the stock exchange via the Internet.
But, if you take advantage of this by trading stocks, it will not be fair to ordinary minority buyers. Agree, if all the property of your company consists of an oil tanker, and you were first informed that it sank, having encountered an iceberg in the Atlantic, then ... you rush to the stock exchange to sell your shares and stay with the money. But the company's shareholders, who learn about the sunken tanker in a couple of days from the CNN report, will be left with a bunch of stocks instantly cheaper to the level of wrappers. Ugly, right?
Therefore, from the moment your company’s shares begin to be traded on the stock exchange, a lot of restrictions will be imposed on many actions with them performed by company executives, key employees or other people with access to important internal business information.
Of course, you, as the founder of the company, can put part of your shares on IPO. This is still normal, quite honestly. But immediately after the IPO they will not be able to sell them. Not only you, but any owner of large blocks of shares (who received them before the IPO - early angel investors, etc.) in general. Those whose shares were not put up for IPO are forbidden to sell them for a certain period after the opening of trading. This is called a lock-up (or lock-in, or lock-out, or maybe lock-some-another-adverb) period, and believe me, this is not 2-3 hours. More likely from 3 to 6 months. Before the IPO, the whole process was carefully calculated, but since in reality not all the company's shares are listed on the IPO, but about 20%, so 80% remains on hand, and the sale of a large volume can seriously undermine the market. History tells you that after the end of the lock-up, stock quotes fall on average by a few percent. Have you seen how money flows through your fingers? Then imagine how, after the start of trading on the stock exchange, stocks fall in price below the subscription price. And put yourself in the place of the owners of the shares that received them before the IPO - they are not allowed to sell shares during the lock-in.
So take heart, Lamborghini Gallardo does not shine on money from the sale of shares immediately after an IPO, unless you put your shares directly on the IPO at a "subscription" price, which is likely lower than that which will be determined on the exchange at the start of trading. And you do not need to take Lambo “to the company” in the “hospitality expenses” section - large investors will be unpleasantly surprised by the irrational spending of the budget. And even if you are not just a leader, but also the owner of a non-blocking block of shares, do not think that this will prevent the majority of shareholders at the general meeting of shareholders from depriving you, the Founder, Old-Timer and the Person of the Company, of a leading position. Shares, however, will be left to you, they will not be expelled from shareholders, do not be afraid. And do not be impudent at all, Lexus will be enough to get to Auchan on lease.
And still I do not understand: how does the concept of “insider” fit in with the ownership of shares by employees?
Yes, a known issue.
It seems to many that the concept of insider information is something cinematic when a company employee in a worn suit and dark glasses secretly tells the young trader the secret about the upcoming merger-acquisition-purchase-sale or some other event in the company that will greatly affect per stock price. And the trader, as if at random, buys these shares himself and capitalizes on growth. Such an implementation of insider by its semantic load is akin to stealing an ATM directly from the bank wall, and they are trying to fight this manifestation of insider.
Obviously, the employees of any company (and especially the management) themselves have much more internal information (and much more often) than can be shown in any feature film.
No matter how anti-etymological this may sound, not all “internal” information, even constituting a trade secret, is insider information. For exchanges, only that information is important, which can significantly affect stock exchange rates. Let's say this month a second gold mining machine was put in a key lead-distillation workshop - this is an event from the category of those after which people will want to buy your shares, because they will probably go up in price. And if the director’s secretary was replaced with an old Acer laptop with a glamorous iMac in strasses, the exchange’s reaction will be cleaned up in a couple of minutes spent by the only financial analyst looking at the secretary’s photo and thinking, her third or fourth size.
In addition, insider information is not only the meaning of information, but also its time. Knowing the caretaker of a lead distillation workshop about installing a second machine is insider until the company issued a press release about it. Once information has become publicly available, it can no longer be considered an insider.
But such information is generally an insider, regardless of who will use this information. If the director wants to use this information for the mercenary purposes during the period between the transaction to purchase a second gold mining machine, this is an insider transaction, his candlestick. If the watchman is still an insider deal. The director’s wife (or the watchman’s wife) is also an insider deal! Even if at the time when the director of the largest lead distillation plant in Russia was riding in a tight minibus and discussing a machine that arrived by mobile phone with his deputy, and the grandmother standing on the director’s foot heard this, it’s also an insider for her (in fact, the latter case is enough controversial, because sometimes it is believed that the degree of importance of information should correlate with the degree of its reliability - otherwise you never know, maybe in the minibus chatted a nut who escaped from Kashchenko). And if it turns out that someone who owned this information (or even just had access to it) made a deal and made a profit ...
It remains to be hoped that the severity of laws (as well as the mandatory implementation of them) is different in different countries, and if our FFMS is still inconsiderate and merciful, then the SEC in the USA are generally animals,
It seems clear with the insider. But still ... what, it’s a pity to them if the director quietly buys shares on the stock exchange, knowing that a second machine will appear soon? What is the harm of insider?
Everything is simple. Who is the main person on the exchange, whom everyone loves, cares, cherishes and cherishes? (Little Vovochka, you said " puppeteer? Get out of class!) A shareholder, especially a minority shareholder (who said, “Would Navalny hear you?” Little Vovochka, again, you? Close the door and don’t look into the classroom!) What happens when the insider information director buys shares? He will make money. At the expense of whom? And at the expense of these most honest shareholders, those from whom he bought shares, and to whom he will sell them (later). One shareholder earned at the expense of others, possessing secret information that they did not own. Well, how to peep at other people's cards in poker. What kind of peeping cards is it customary to do? Candle holder!
And if the director (or another leader), and not just some ordinary employee, is hooligan, the food is missing. He is an ordinary employee (even if he has stocks!), And his main duty, his duty to his employer-business owners, is to make a profit in the company. That is to shareholders. And here he, on the contrary, profits at their expense ...
So in the end, when does the management and employees trade stocks so that their trading is not regarded as using insider information?
Hmm, I thought it was obvious. There is one point: insider information is information that can affect stock prices. Point two: insider information is information that has not yet become public.
It is generally believed that it’s quite safe to rake the shares of your beloved company exactly after the publication of the official financial report. Well, if you don’t know any significant secret that is not reflected in the financial report.
And also, depending on the jurisdiction, if the management or key persons of the company sell shares, they may need to report this to the commission / market regulator. And they will publish this information officially, so that there is absolutely no risk of “using an administrative resource”.
And then you will have both the yellow Gallardo and the thin Tamarka from the fifth floor in the passenger seat.
I was already disappointed in the hope of cutting down the dough at the startup. I will do it, so be it, for the sake of lowering the entropy of the universe. I will distribute the shares to employees. How to do it competently?
But about this in the next part. :)
In the next part : about motivation.