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Why are 424B3s that are the resale of selling stockholders not considered dilution or some type of selling pressure?

Written by Shawn Stevenson
Updated over 2 years ago

EFFECT for an resale S-1 is technically not new dilution as the shares already existed. For resales covering warrants/convertibles, those securities will be shown on DT in their respective sections. Resale shares may have large price impact if the following is true:

  1. Number of shares being sold is high relative to float. e.g. a <5m float stock receives pressure from >10m shares being sold

  2. No lock-up preventing the shares from being sold

  3. Deducible that the selling shareholders are looking to sell immediately

  4. Deep in the money for warrants/convertibles.

424B3s are filed whenever a S-1 resale registration receives EFFECT. They will also be filed again for the same resale S-1 whenever a new public disclosure is made such as an 8-k or 10-q. In these instances the new 424b3 filings are not relevant as they are simply mandatory disclosures.

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