IPO for dummies. Part VII: about insider
Start and table of contents, see the first part .
So what about the insider?
If you run a company, then 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 advantage when trading stocks, it will be unfair to ordinary minority buyers. Admit it, if all of your company's property consists of an oil tanker, and you were first told that it sank when it collided with an iceberg in the Atlantic, then ... you rush to the stock exchange to sell your shares and stay with the money. But the shareholders of the company, who will find out about the sunken tanker in a couple of days from a CNN report, will be left with a bunch of instantly cheapened shares to the level of candy 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 who have access to important internal business information.
Of course, you, as the company's founder, can put part of your shares on an IPO. This is still normal, quite honest. But right after the IPO, it’s impossible 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 not allowed to sell them for a certain period after the opening of trading. This is called lock-up (or lock-in, or lock-out, or maybe lock-some-yet-adverb) period, and believe me - this is not 2-3 hours. Rather, 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 displayed on the IPO, but about 20%, it means that 80% remain on hand, and selling a large volume can seriously undermine the market. History suggests that after lock-up, stock quotes fall by an average of a few percent. You have not seen how money flows through your fingers? Then imagine how, after the start of trading on the stock exchange, the shares fall in price below the subscription price. And put yourself in the shoes of owners of shares that received them before an IPO - they cannot sell shares during lock-in-a.
So take heart, Lamborghini Gallardo doesn’t shine on the money from the sale of shares immediately after the IPO, unless you put your shares directly on the IPO at the “subscription” price, which is likely to be lower than the one that is determined on the stock exchange at the start of trading. And you don’t need to take Lambo "for the company" in the "representation expenses" section either - large investors will unpleasantly be surprised by irrational budget spending. And even if you are not just a manager, but also an owner of a non-blocking stake, do not think that it will prevent the majority shareholders at a general meeting of shareholders from depriving you, the Founder, Old-Timer and the Person of the Company, of a leading position. Shares, however, they will leave you, will not be expelled from shareholders, do not be afraid. And not at all impudent, Lexus will be enough to get to Auchan and to lease.
Still, I don’t understand: how does the concept of “insider” fit in with employee ownership of shares?
Yes, a known problem.
It seems to many that the concept of insider information is something cinematic when an employee of a company in a worn suit and dark glasses secretly informs the young trader about the secret merger-acquisition-sale or some other event in the company that will greatly affect on the stock price. A trader, as if at random, he buys these shares and profits from the growth. Such an implementation of an insider in terms of meaning is akin to stealing an ATM right from the bank wall, and they are trying to fight this kind of insider action.
Obviously, the employees of any company (and especially the management) have much more internal information (and much more often) than can be shown in any feature film.
However anti-etymological it may sound, not all “internal” information, even constituting a commercial secret, is an insider. For stock exchanges, only information that is important can be significant, which can significantly affect stock exchange prices. For example, this month a second gold mining machine was installed at a key lead refining shop - this is an event from the category of those after which people will want to buy your shares, because they will certainly rise in price. And if the secretary of the director replaced the old Acer laptop with a glamorous iMac in straziki, the exchange’s reaction would be removed in a couple of minutes spent by the sole financial analyst looking at the secretary’s photo and thinking, her third size or fourth.
In addition, insider is not only the value of information, but also its time. The knowledge of the watchman of the lead distillation shop about the installation of the second machine is an insider until the company has issued a press release about it. After the information has become publicly available, it can in no way be considered an insider.
But in the general case, such information is an insider regardless of who will use this information. If during the time period between the completion of a transaction for the purchase of a second gold-mining machine, the director wants to use this information for personal gain, this is an insider transaction, a candlestick. If the watchman - still an insider deal. The director’s wife (or the caretaker’s wife) is also an insider deal! Even if at a time when the director of the largest lead-distillation plant in Russia was traveling in a tight minibus and the machine arrived, he talked over the mobile phone with his deputy, and the grandmother standing on the director’s leg was for her too an insider (in fact, the latter is enough controversial, because sometimes it is believed that the degree of importance of information must correlate with the degree of its reliability - and then you never know, maybe in a bus chatted a psyche 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 will remain to hope that the severity of laws (as well as the obligation to implement them) is different in different countries, and if our FFMS is still inattentive and merciful, then the SEC in the USA is generally beasts,they are not even given out weapons .
It seems clear with insider. But still ... what, it is a pity to them if the director quietly buys shares on the stock exchange, knowing that a second machine will soon appear? What is the harm of insider?
It's simple. Who is the main person on the exchange, whom everyone loves, cares, cares and cherishes? (Little Johnny, did you say “ puppeteer ”? Get out of class!) Shareholder, especially minority shareholder (who said, “Would you hear Navalny?” Little Johnny, again you? Close the door and don't look into the class!) What happens when the director on insider information buy shares? He will make money for himself. Due to whom? And at the expense of these most honest shareholders, those from whom he bought the shares, and to whom he (later) will sell them. One shareholder earned at the expense of others, having secret information that they did not possess. Well, as in other people's cards in poker pry. What is there to peek at the cards to do? Candlestick!
And if the director (or another manager) is hooligan, and not just some ordinary employee - the food is gone. After all, he is an ordinary wage earner (even if he has shares!), And his main duty, his duty to his employer-business owners, is to bring profit to the company. That is, the shareholders. And then he, on the contrary, at the expense of them is cashing in on ...
So in the end, when should management and employees trade stocks, so that their trading would not be regarded as the use of insider information?
Hmm, I thought it was obvious. Point one: insider is information that can affect stock prices. Point two: insider is information that has not yet become public.
It is usually considered that it is safe to indulge in shares of your favorite company right after the publication of the official financial report. Well, if you do not know any significant secret that is not reflected in the financial report.
And yet, depending on the jurisdiction, if the management or key persons of the company trade in shares, they may need to report to the commission / market regulator. And they will publish this information officially, so that there is absolutely no risk of “using administrative resources”.
Then it will be you and the yellow Gallardo, and thin Tamarka from the fifth floor on the passenger seat.
I was already disappointed in the hope of cutting a dough on a startup. I will do it, so be it, for the sake of lowering the entropy of the universe. And the shares will distribute to employees. How to do it correctly?
But about this in the next section. :)
In the next part : about motivation.
So what about the insider?
If you run a company, then 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 advantage when trading stocks, it will be unfair to ordinary minority buyers. Admit it, if all of your company's property consists of an oil tanker, and you were first told that it sank when it collided with an iceberg in the Atlantic, then ... you rush to the stock exchange to sell your shares and stay with the money. But the shareholders of the company, who will find out about the sunken tanker in a couple of days from a CNN report, will be left with a bunch of instantly cheapened shares to the level of candy 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 who have access to important internal business information.
Of course, you, as the company's founder, can put part of your shares on an IPO. This is still normal, quite honest. But right after the IPO, it’s impossible 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 not allowed to sell them for a certain period after the opening of trading. This is called lock-up (or lock-in, or lock-out, or maybe lock-some-yet-adverb) period, and believe me - this is not 2-3 hours. Rather, 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 displayed on the IPO, but about 20%, it means that 80% remain on hand, and selling a large volume can seriously undermine the market. History suggests that after lock-up, stock quotes fall by an average of a few percent. You have not seen how money flows through your fingers? Then imagine how, after the start of trading on the stock exchange, the shares fall in price below the subscription price. And put yourself in the shoes of owners of shares that received them before an IPO - they cannot sell shares during lock-in-a.
So take heart, Lamborghini Gallardo doesn’t shine on the money from the sale of shares immediately after the IPO, unless you put your shares directly on the IPO at the “subscription” price, which is likely to be lower than the one that is determined on the stock exchange at the start of trading. And you don’t need to take Lambo "for the company" in the "representation expenses" section either - large investors will unpleasantly be surprised by irrational budget spending. And even if you are not just a manager, but also an owner of a non-blocking stake, do not think that it will prevent the majority shareholders at a general meeting of shareholders from depriving you, the Founder, Old-Timer and the Person of the Company, of a leading position. Shares, however, they will leave you, will not be expelled from shareholders, do not be afraid. And not at all impudent, Lexus will be enough to get to Auchan and to lease.
Still, I don’t understand: how does the concept of “insider” fit in with employee ownership of shares?
Yes, a known problem.
It seems to many that the concept of insider information is something cinematic when an employee of a company in a worn suit and dark glasses secretly informs the young trader about the secret merger-acquisition-sale or some other event in the company that will greatly affect on the stock price. A trader, as if at random, he buys these shares and profits from the growth. Such an implementation of an insider in terms of meaning is akin to stealing an ATM right from the bank wall, and they are trying to fight this kind of insider action.
Obviously, the employees of any company (and especially the management) have much more internal information (and much more often) than can be shown in any feature film.
However anti-etymological it may sound, not all “internal” information, even constituting a commercial secret, is an insider. For stock exchanges, only information that is important can be significant, which can significantly affect stock exchange prices. For example, this month a second gold mining machine was installed at a key lead refining shop - this is an event from the category of those after which people will want to buy your shares, because they will certainly rise in price. And if the secretary of the director replaced the old Acer laptop with a glamorous iMac in straziki, the exchange’s reaction would be removed in a couple of minutes spent by the sole financial analyst looking at the secretary’s photo and thinking, her third size or fourth.
In addition, insider is not only the value of information, but also its time. The knowledge of the watchman of the lead distillation shop about the installation of the second machine is an insider until the company has issued a press release about it. After the information has become publicly available, it can in no way be considered an insider.
But in the general case, such information is an insider regardless of who will use this information. If during the time period between the completion of a transaction for the purchase of a second gold-mining machine, the director wants to use this information for personal gain, this is an insider transaction, a candlestick. If the watchman - still an insider deal. The director’s wife (or the caretaker’s wife) is also an insider deal! Even if at a time when the director of the largest lead-distillation plant in Russia was traveling in a tight minibus and the machine arrived, he talked over the mobile phone with his deputy, and the grandmother standing on the director’s leg was for her too an insider (in fact, the latter is enough controversial, because sometimes it is believed that the degree of importance of information must correlate with the degree of its reliability - and then you never know, maybe in a bus chatted a psyche 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 will remain to hope that the severity of laws (as well as the obligation to implement them) is different in different countries, and if our FFMS is still inattentive and merciful, then the SEC in the USA is generally beasts,
It seems clear with insider. But still ... what, it is a pity to them if the director quietly buys shares on the stock exchange, knowing that a second machine will soon appear? What is the harm of insider?
It's simple. Who is the main person on the exchange, whom everyone loves, cares, cares and cherishes? (Little Johnny, did you say “ puppeteer ”? Get out of class!) Shareholder, especially minority shareholder (who said, “Would you hear Navalny?” Little Johnny, again you? Close the door and don't look into the class!) What happens when the director on insider information buy shares? He will make money for himself. Due to whom? And at the expense of these most honest shareholders, those from whom he bought the shares, and to whom he (later) will sell them. One shareholder earned at the expense of others, having secret information that they did not possess. Well, as in other people's cards in poker pry. What is there to peek at the cards to do? Candlestick!
And if the director (or another manager) is hooligan, and not just some ordinary employee - the food is gone. After all, he is an ordinary wage earner (even if he has shares!), And his main duty, his duty to his employer-business owners, is to bring profit to the company. That is, the shareholders. And then he, on the contrary, at the expense of them is cashing in on ...
So in the end, when should management and employees trade stocks, so that their trading would not be regarded as the use of insider information?
Hmm, I thought it was obvious. Point one: insider is information that can affect stock prices. Point two: insider is information that has not yet become public.
It is usually considered that it is safe to indulge in shares of your favorite company right after the publication of the official financial report. Well, if you do not know any significant secret that is not reflected in the financial report.
And yet, depending on the jurisdiction, if the management or key persons of the company trade in shares, they may need to report to the commission / market regulator. And they will publish this information officially, so that there is absolutely no risk of “using administrative resources”.
Then it will be you and the yellow Gallardo, and thin Tamarka from the fifth floor on the passenger seat.
I was already disappointed in the hope of cutting a dough on a startup. I will do it, so be it, for the sake of lowering the entropy of the universe. And the shares will distribute to employees. How to do it correctly?
But about this in the next section. :)
In the next part : about motivation.
Source: https://habr.com/ru/post/123312/
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