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Thread: Escrow?

  1. #1

    Join Date
    Aug 2005
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    Default ESCROW?

    Cumminscorp a delisted company keeps raving on about escrow listed securities being released.

    what does this mean?

  2. #2
    Pigs In Space GreatPig's Avatar
    Join Date
    Jul 2004

    Default Re: Escrow?

    Not sure in their case, but escrowed shares are usually those owned by company founders that they're not allowed to sell for some time after the float.

    Typically during a float, the original shareholders of a private company will only sell a percentage of their shares. The rest will be escrowed for a few years (ie. prevented from being sold) to ensure they can't just dump and run, possibly leaving the company to flounder due to loss of the key personnel.

    When the escrow period runs out, there's the potential for large numbers of shares to hit the market as those founding shareholders possibly try to turn more of their shares into cash. That can potentially depress the share price.

    In fact, I think the brokers that handle the float sometimes try to push the price down at that time to discourage those original shareholders from selling. Having been through this situation myself, the company share price dropped quite a lot just prior to the escrow period expiring.


  3. #3
    lancedefrance's Avatar
    Join Date
    Aug 2006

    Default Re: Escrow?

    Great explanation there thanks mate

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