Executive Compensation: Maximizing Returns When Selling Restricted or Control Stock
Talk to Infinity About the Transfer of Restricted Stock and the Sale of Restricted Securities
When it comes time to sell restricted stock* and control stock†, timing, knowledge, and experience can make the difference in maximizing returns. Plus, sales must be facilitated in a manner that ensures compliance with the applicable sections of SEC Rules 144 and 145. Ask us about establishing an automated approach to handling the regulatory burden through a 10B5-1 plan.
Depending upon your circumstances, you may choose to:
- Sell your restricted or control shares.
- Use your securities as collateral for a margin loan.
- Use possible hedge strategies against the positions, where allowed.
If you’re looking at any of these possibilities, contact us to help you review your options, choose the appropriate tactical move, and execute the transaction in accordance with all regulatory requirements.
* Restricted stock is stock that is acquired in an unregistered, private sale from an issue or an affiliate of an issuer. Investors typically receive restricted stock through private placement offerings, Regulation D offerings, employee stock benefits plans, as compensation for professional services, or in exchange for providing seed money or startup capital to a company.
† Control stock is stock held by an affiliate of the issuing company. If you buy securities from a controlling person or “affiliate,” you take restricted stock, even if it wasn’t restricted in the affiliate’s hands.
What are customized lending solutions?
Customized Lending Solutions are credit facilities designed to meet liquidity needs in excess of $1 million and to secure loans with non-diversified collateral. Mesirow Advisors, who provide financing expertise, work closely with you and us to tailor secured loans while helping to keep your investment strategy secure.
Examples of Customized Lending Solutions
Diversifying a Concentrated Stock Position. A senior executive from a Fortune 500 company receives equity-based compensation and a large portion of his net worth is tied up in the company's stock. He could improve his diversification by borrowing against his shares and investing the proceeds in a professionally managed account at Infinity, suited to his investment strategy and risk tolerance. This could help protect him against the downside risk associated with a concentrated equity position while deferring capital gains taxes.
Enhancing Lifestyle and Purchasing Real Estate. A business owner sells a successful software company to a public corporation and receives stock from the acquiring company. She wants liquidity to translate her wealth into a more affluent lifestyle and to diversify a concentrated stock position. To achieve these goals, she could exchange the company stock for more-diversified shares of an exchange-traded fund, without triggering a taxable event in the process. She could then pledge the fund shares as collateral for a loan to finance the purchase of a co-op and a ranch.
