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Why are 424B3s that are the resale of selling stockholders not considered dilution or some type of selling pressure?
Why are 424B3s that are the resale of selling stockholders not considered dilution or some type of selling pressure?
Shawn Stevenson avatar
Written by Shawn Stevenson
Updated over a year 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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