When a company issues shares privately — via a PIPE, a convertible note conversion, or as compensation — the shares are 'restricted.' They legally cannot be sold on the open market until either the company registers them with the SEC or the holder qualifies for a Rule 144 exemption.
Knowing the exact date restricted shares unlock is half the trade in small-cap deal-driven names.
Registration: the standard path
The company files a registration statement (S-1 or S-3) listing the restricted shares and the selling holders. After SEC review, EFFECT is granted. From the EFFECT date forward, those shares trade freely.
For PIPE deals, registration is contractually required within a set window — usually 30 to 90 days. Watch for the resale S-1 or S-3 filing, then track the EFFECT calendar. The 424B3 confirms effectiveness.
Rule 144: the exemption
Rule 144 lets a holder sell restricted shares without registration after holding them for a minimum period, subject to volume limits for affiliates.
Non-affiliate holding period: 6 months for reporting companies, 12 months for non-reporting. After 12 months, non-affiliates can sell freely with no volume cap.
Affiliate (officer, director, 10%+ holder) volume cap: the greater of 1% of total shares outstanding or the average weekly trading volume over the prior 4 weeks. Affiliates also need to file a Form 144 notice for sales over 5,000 shares or $50,000 in a 90-day window.
Why this matters for traders
The day restricted shares become freely tradable is a supply event. If the unlocked pool is large versus the trading float, expect persistent selling pressure for weeks.
Watch for the resale 424B3 — that's the 'shares are now sellable' confirmation. Check the named selling shareholders. Short-term hedge funds will sell same-day. Long-only strategics may hold; their position size and lockup language tell you which case you're in.
The calendar to track
PIPE close → resale S-1/S-3 filing (within contractual window) → SEC review (typically 30–60 days) → EFFECT → 424B3 → free trading.
Convert issuance → conversion to shares (may itself be restricted) → resale registration cycle as above.
Insider grant → 6 or 12 month Rule 144 hold → Form 144 filing → open-market sale.
Stocks Leak's filing feed flags resale registrations and EFFECT dates so you don't have to refresh EDGAR.