Actionable Ideas for Companies and Sponsors 

Rule 144 Execution as an Alternative to U.S. Registered Secondary Share Sales 

Financial sponsors and other affiliated shareholders executed 103 100% secondary offerings in 2022 through registered follow-ons, registered blocks, and Rule 144 sales. In a shift from prior years, the majority of the activity and dollar volume was completed through Rule 144, a provision of the Securities Act of 1933 which allows restricted and control stock shareholders an exemption to registration restrictions under certain conditions. As a result, Rule 144 trades require limited advance work and can be executed with no upfront documentation. The most relevant condition for affiliates is a limitation on the size of the block. The limitation is the greater of 1% of the shares outstanding or the average weekly trading volume for the four weeks preceding the sale, with the volume test resetting 90 days following a sale. Affiliate shareholders may also consider hedging and structured monetization ideas under Rule 144, as an alternative or add-on to block or dribble-out execution. Structured monetization alternatives can meet various goals such as reducing the effective block discount, maintaining some upside exposure, or maintaining ownership in monetized shares for voting, legal and/or tax purposes. Jefferies has significant experience executing Rule 144 blocks and structured monetizations.