Definition of Piggyback Registration Rights
Piggyback Registration Rights allow an investor to participate in an IPO filing initiated by a company.
Without piggyback rights, an investor can find that his or her shares remain illiquid while other investors are able to achieve a financial exit.
When piggyback registration rights are exercised, the securities underwriter will include those existing ownership shares along with an offering of new public shares.
Having piggyback rights does not mean you can initiate an IPO filing. It only means you can join in the offering if one occurs.
Entrepreneurs should always require that they receive piggyback registration rights on their shares. However, all piggyback rights are not created equal. It's very important to engage a competent lawyer and to read the fine print. For example, if you read carefully, you might find that your piggyback rights can be made null and void by the securities underwriter at their discretion.
Granting piggyback registration rights is typically spelled out in the stockholders agreement.