What is considered as an insider trading? Anyone who is having key information of the company’s future prospects well in advance and indulges in trading by acquiring or selling shares of such firm is considered insider trading. This included the company’s top management like the chairman or the CEO or the CFO and other top executives, who are part and parcel of the decision-making. Their activities are closely watched, both in short-term and long-term, since it provides some directions to investors as to what futures hold for the company.
Initial Public Ofering (IPOs)
Initial public offerings (IPO) are normally used to raise fresh equity capital from the market. This happens only when the company forays into the market for the first time. At the same time, founders of the company or private shareholders or private equity investors also use this method to divest their holdings in the company either wholly or partly depending on the market conditions. This allows them to monetize their investments made in the company over a period of time.
This is a type of offering that allows both institutions and large investors to offload their large block of holdings in the particular company through the registration. According to the U.S. financial Industry Regulatory Authority (FINRA), the sale proceeds of the offering will not go to the company and to the selling stockholders. These shares were already issued to the selling stock holders and that they are selling in large blocks at their convenient time after completing the restricted period. This is also known as secondary distribution.
Note: The above data are obtained from U.S. Securities and Exchange Commission Website