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The process for
executing the private sale of illiquid securities involves the following steps:
1. List
the Position – An owner of illiquid securities
contacts Restricted Stock Partners (RSP) and indicates
the position he or she would like to sell. A Restricted
Securities Specialist gathers basic information, such
as the ticker symbol, acquisition date of the securities,
how the securities were acquired and the nature of the
restrictions on them.
2. Obtain
Bids – RSP contacts potential buyers based
on their indicated preferences, which may include the
size of the position, liquidity of the underlying public
stock, the industry the company issuing the securities
operates in and other factors. The seller may limit the
amount of information RSP provides to potential buyers.
3. Negotiate Terms
– Once one or more suitable buyers are identified,
the Restricted Securities Specialist helps the parties
negotiate key terms of the transaction. All parties remain
anonymous.
4. Execute a Restricted
Security Order – When both parties agree
upon terms, the buyer and seller execute a document called
a Restricted Security Order (RSO) that details the transaction
at hand. The document is exchanged between buyer and seller
and identities are revealed.
5. Closing
– RSP facilitates all aspects of closing, including
preparation of the following documentation:
•
A purchase agreement
• An escrow agreement
• A buyer's representation
letter
• A seller's representation
letter
• An opinion letter
from company counsel
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Once the documentation
is finalized by the parties and executed, the opinion
letter, the physical securities and other transfer
documents (e.g., stock power) are sent to the company's
transfer agent, along with a letter requesting that
a stock certificate be reissued in the name of the
buyer.
If the documentation is
in order, and the issuer has not objected to the
transfer, the transfer agent cancels the existing
stock certificate and reissues a new certificate.
During this process, the buyer's cash payment is
typically held in escrow pending completion of the
transfer.
Generally, once the RSO
is executed, the buyer will receive a new certificate
and the seller will receive proceeds within two
to three weeks.
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