Rule 144

Rule 144 is the SEC rule that governs how restricted and control securities can be resold to the public. Restricted securities are shares acquired through an unregistered, private transaction, such as stock granted to an early employee or purchased in a private placement, while control securities are shares held by company insiders like officers, directors, or large affiliated shareholders, regardless of how they were acquired.

To sell restricted securities under Rule 144, every holder must first satisfy a minimum holding period. After that, a holder who is not an affiliate of the company can sell freely, with the company's current public information only a condition during the first year. Affiliates face more conditions on every sale: the company must have current public information available, each sale must stay within volume limits tied to a percentage of the company's outstanding shares or its average trading volume, and larger sales require a notice filed with the SEC around the time of the sale.

Rule 144 exists to let holders of restricted or control stock eventually access liquidity without forcing a full public registration process for every sale, while still limiting how quickly that stock can hit the market. For other investors, a large amount of Rule 144 stock becoming eligible for sale, often once an IPO lockup period ends or an early investor's holding period is satisfied, can be a source of new selling pressure in a stock that had not previously shown up in the ordinary trading volume.