To: Glenn D. Rudolph who wrote (4859 ) 5/30/1998 12:40:00 PM From: Oeconomicus Read Replies (1) | Respond to
Glenn, "restricted" stock can mean a few different things, but most commonly it is what is frequently referred to as "letter stock". Shareholders who purchased their stock directly from the company and not through a registered public offering, like Bezos himself or the VCs, early employees, etc., hold stock that is stamped with a legend indicating that the stock is restricted, that it is not registered with the SEC and may not be sold, pledged, hypothecated, blah, blah, blah. Under rule 144, this stock can be sold after a one year holding period, subject to certain volume restrictions and only after filing a Form 144. Alternatively, the issuer can file a registration statement with the SEC to register the stock, making it freely tradeable without restrictions. Persons holding this stock before the one year holding period is over can not sell it or use it as margin for a short against the box, but with other margin and assuming shares can be borrowed, they can short the stock to lock in any gains. Alternatively, if options are traded, they can purchase puts to hedge or a collar to lock in gains. Of course, with the collar, they would need other margin again to cover to exposure on the short call position since the stock can't be delivered if the call is exercised.
