What is a Stock Registration?

Stock registration is the process of registering a company's stock for sale to the public. In the United States, this requires the filing of registration documents with the Securities and Exchange Commission (SEC), which can be an expensive and lengthy process. An issuer must submit audited financial statements to the SEC as part of a stock registration. In the absence of a stock registration, shares sold to investors cannot be re-sold to third parties, except on a very limited basis under the SEC's Rule 144.

Given the considerable expense of a stock registration, many entities instead use registration exemptions, such as Regulation A.

Example of Stock Registration

As an example of the stock registration process, here are the steps that a technology company would have to complete as part of its initial public offering:

Prepare a registration statement. The company prepares a Form S-1 registration statement to file with the SEC. This document includes company information, financial statements, risk factors, a management discussion and analysis section, and several related topics.
Filing with the SEC. The company files its Form S-1 with the SEC, initiating the registration process. The SEC reviews the filing to ensure that all necessary information has been disclosed for investors to make informed decisions.
SEC review and comment period. The SEC provides feedback and may ask for additional information or revisions. The company addresses these comments by amending its filing until the SEC is satisfied.
Preliminary prospectus. Once the registration statement is deemed substantially complete, the company issues a preliminary prospectus (sometimes called a "red herring"). This document is shared with potential investors during a roadshow, where the company and its underwriters promote the IPO.
SEC effectiveness. After resolving all SEC comments, the registration statement becomes effective. This means ABC Tech can proceed with the IPO.
Issuance of stock. The company officially lists its shares on a stock exchange (e.g., NYSE or NASDAQ) and begins selling shares to the public.